What prompted the enactment of the Sarbanes-Oxley Act of 2002?

The Sarbanes-Oxley Act of 2002 was primarily enacted in response to a series of high-profile corporate scandals that shook public confidence in the U.S. financial markets. These scandals involved major corporations, such as Enron and WorldCom, where fraudulent accounting practices and corporate malfeasance led to enormous financial losses for investors and irreparable damage to the companies involved.

The act was designed to enhance corporate governance and accountability in order to protect investors and improve the accuracy of financial reporting. It introduced stringent new regulations on financial disclosure and created the Public Company Accounting Oversight Board (PCAOB) to oversee auditors of public companies. The goal was to ensure greater transparency and to restore confidence in the financial system.

In this context, while market growth, international trade, and technological advancements may impact the business environment, they were not the direct catalysts for the legislation like the corporate scandals were. The focus of the Sarbanes-Oxley Act is fundamentally about improving corporate responsibility and transparency, given the troubling events that highlighted weaknesses in oversight and accountability within corporate America.