What is the effect of the SOX on public companies?

After a prolonged period of corporate scandals in the United States from 2000 to 2002, the Sarbanes- Oxley Act (SOX) was enacted in July 2002 to restore investors' confidence in the financial markets and close loopholes that allowed public companies to defraud investors. The act had a profound effect on corporate governance in the U.S. The Sarbanes-Oxley Act requires public companies to strengthen audit committees, perform internal controls tests, make directors and officers personally liable for accuracy of financial statements, and strengthen disclosure. The Sarbanes-Oxley Act also establishes stricter criminal penalties for securities fraud and changes how public accounting firms operate.

Public companies in the US must comply with SOX. It is used also by companies in the stock exchange market.