Sarbanes-Oxley is the US federal government's reaction to the corporate debacles of Enron, WorldCom, Adelphia, and several other companies. The law requires specific financial reporting by public companies, with severe penalties for willful misrepresentation of financial results or forecasts.

Although SOX applies directly to publicly owned companies, its provisions also apply to privately held companies. The difference lies in the enforcement provisions and penalties for noncompliance.