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The Sarbanes-Oxley act was passed into law in 2002 (Romano, 2004) . The act requires mandatory compliance from all organizations no matter what size they are. This legislation introduced major changes to financial practice and corporate governance. The legislation was named after Paul Sarbanes and Micheal Oxley (Romano, 2004). These individuals are the original architects of this piece of law. The act consist of 11 titles of which six titles are specifically built around compliance. The act also established an over-arching public company accounting board. This act does not directly effect foreign corporations, however, it can effect them vicariously. Romano (2004) states there are over 1300 companies currently listed within U.S. markets and this act does effect them.
Foreign companies who are listed in U.S. markets and foreign accounting firms which provide accounting services to U.S. based business are effected by this act. This raises the question of extraterritoriality because foreign companies must comply with all parts of the act if they meet any of the previously mentioned conditions. Because of the implications of this act on foreign actors, this has produced economic, political, and legal ramifications for the United States (Shirley, 2004) . There are exemptions for the act under certain conditions, but most foreign actors have found they are unable to use these exemptions and due to the complexity of the law, they find it difficult to comply. Additionally this raises the question of impingement of sovereignty by the United States in forcing other countries to confirm to U.S. laws pertaining to international audits and inspections. It would be beneficial to the United States to find a viable alternative to this act for external actors of the United States. A law that better aligns with the international communities expectations around corporate governance and financial inspection.
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