Question

Under the Sarbanes Oxley Act of 2002, the section on Corporate Responsibility requires a company's CEO and CFO to certify quarterly and annual reports.

a. true
b. false

Answer 1

It is true that the Sarbanes-Oxley Act of 2002 requires CEO and CFO certification of financial reports. This act seeks to prevent accounting fraud and increase investor confidence by enforcing corporate governance and executive accountability.

Step-by-step explanation:

Under the Sarbanes-Oxley Act of 2002, specifically section 302, it is indeed true that the act requires the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) to certify the completeness and accuracy of the quarterly and annual reports submitted to the Securities and Exchange Commission (SEC). This section of the act aims to increase the accountability of top executives and ensure the integrity of the financial reports, thereby protecting investors and the public from the kind of corporate malfeasance seen in scandals with corporations like Enron, Tyco International, and WorldCom.

Corporate governance plays a crucial role in maintaining the trust of investors, and this includes a range of checks and balances, such as the board of directors, external audit firms, and large shareholders. The corporate governance and oversight mechanisms are key to providing accurate financial information to investors and are essential in preventing cases like the failure seen with Lehman Brothers.