Enacted as a United States federal law on July 30, 2002, in response to the much-publicized financial scandals of corporate public companies such as Enron, Adelphia, Tyco International, WorldCom and Peregrine Systems, the Sarbanes-Oxley Act of 2002 is named after US Senator Paul Sarbanes and US Representative Michael G. Oxley who initiated it. Known in the US Senate as the 'Public Company Accounting Reform and Investor Protection Act' and in the House as the 'Corporate and Auditing Accountability and Responsibility Act', it is more commonly referred to simply as Sarbox, or SOX.

Sarbox set improved standards applying to US public company boards and management, as well as public accounting firms. Consisting of eleven categories, the SEC was called upon to implement rulings on requirements in order to comply with the law. This led to the formation of the Public Company Accounting Oversight Board (PCAOB) with dozens of rules governing the oversight, regulation, inspection and, where necessary, disciplining of accounting firms responsible for auditing public companies.

There has been much debate with regard to the value of Sarbox, with proponents confident that it has done much to restore public confidence in US capital markets, and opponents being of the opinion that it has created an unnecessarily complex regulatory environment which has impacted negatively on America's international competitiveness against foreign financial service providers. Nevertheless, Sarbox remains in place.

The eleven categories of Sarbox are each divided into several sections, with the main headings being: Public Company Accounting Oversight Board (PCAOB); Auditor Independence; Corporate Responsibility; Enhanced Financial Disclosures; Analyst Conflicts of Interest; Commission Resources and Authority; Studies and Reports; Corporate and Criminal Fraud Accountability; White Collar Crime Penalty Enhancement; Corporate Tax Returns; and Corporate Fraud Accountability.

Some of the problems addressed and rectified by Sarbox include the self-regulation of auditing firms and the question of their impartiality, especially when it came to light that many of these auditing firms also provided well-paid consulting services for the companies they audited. This is thought to have created a conflict of interest, as auditors would not want to jeopardize their relationship with clients by challenging accounting methods and running the risk of losing the account. It was also found that public company Audit Committees were not totally independent of management, and therefore were not necessarily impartial and transparent when establishing methods of financial reporting of behalf of investors, thereby possibly misleading investors as to the financial soundness of a company.