Multiple Choice
What is the primary legislative impact of the Sarbanes-Oxley Act of 2002 on publicly traded companies in the United States?
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6. Internal Controls and Reporting Cash
Sarbanes-Oxley Act
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The Sarbanes-Oxley Act of 2002 was primarily prompted by which one of the following events from the 1990s?
A
The dot-com bubble burst
B
Major corporate accounting scandals such as Enron and WorldCom
C
The introduction of the euro currency
D
The savings and loan crisis
Verified step by step guidance1
Understand the context of the Sarbanes-Oxley Act of 2002, which was enacted to improve corporate governance and accountability in response to major financial scandals.
Review the events listed in the problem: the dot-com bubble burst, major corporate accounting scandals such as Enron and WorldCom, the introduction of the euro currency, and the savings and loan crisis.
Analyze the timeline: The Sarbanes-Oxley Act was passed in 2002, which aligns with the aftermath of corporate accounting scandals like Enron and WorldCom that occurred in the late 1990s and early 2000s.
Evaluate the relevance of each event: The dot-com bubble burst and the introduction of the euro currency were significant economic events but were not directly related to corporate accounting practices. The savings and loan crisis occurred earlier, in the 1980s, and is not directly tied to the Act.
Conclude that the Sarbanes-Oxley Act was primarily prompted by major corporate accounting scandals such as Enron and WorldCom, as these events highlighted the need for stricter regulations and transparency in financial reporting.
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