Multiple Choice
The Sarbanes-Oxley Act requires corporate officers to:
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6. Internal Controls and Reporting Cash
Sarbanes-Oxley Act
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
What is the primary legislative impact of the Sarbanes-Oxley Act of 2002 on publicly traded companies in the United States?
A
It reduced penalties for fraudulent financial reporting.
B
It allowed companies to self-regulate their accounting standards without government oversight.
C
It established stricter requirements for financial reporting and internal controls to enhance corporate accountability.
D
It eliminated the need for external audits of financial statements.
Verified step by step guidance1
Understand the context of the Sarbanes-Oxley Act of 2002, which was enacted in response to major corporate scandals (e.g., Enron, WorldCom) to restore investor confidence and improve corporate accountability.
Recognize that the Act primarily impacts publicly traded companies by imposing stricter requirements for financial reporting and internal controls.
Learn that the Act established provisions such as Section 404, which mandates companies to assess and report on the effectiveness of their internal controls over financial reporting.
Note that the Act also requires external auditors to evaluate and attest to the effectiveness of these internal controls, ensuring independent oversight.
Understand that the Act increased penalties for fraudulent financial reporting and established the Public Company Accounting Oversight Board (PCAOB) to oversee the audits of public companies, enhancing regulatory oversight.
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