Question

Which statements are true about the Sarbanes-Oxley Act of 2002? (Select all that apply.)

a) It was enacted to improve corporate governance and financial reporting
b) It established the Public Company Accounting Oversight Board (PCAOB)
c) It primarily focuses on promoting tax incentives for businesses
d) It requires CEOs and CFOs to certify the accuracy of their company's financial statements
e) It is unrelated to corporate financial practices

Answer 1

The Sarbanes-Oxley Act of 2002 was enacted to improve corporate governance and financial reporting, established the PCAOB, and requires CEOs and CFOs to certify their company's financial statements. Statements focusing on tax incentives or suggesting the act is unrelated to financial practices are incorrect.

Step-by-step explanation:

The Sarbanes-Oxley Act of 2002 was created in the wake of major accounting scandals involving well-known corporations like Enron, Tyco International, and WorldCom. The statements that are true about the Sarbanes-Oxley Act include:

• It was enacted to improve corporate governance and financial reporting, ensuring that investors are provided with accurate and truthful financial information.
• It established the Public Company Accounting Oversight Board (PCAOB) to oversee the audits of public companies, thereby enhancing the quality and reliability of financial statements.
• It requires CEOs and CFOs to certify the accuracy of their company's financial statements, making top executives personally responsible for any discrepancies or fraudulent reporting.

The statement concerning tax incentives (c) is incorrect as the act does not focus on tax incentives for businesses, and (e) is also false since the act is directly related to corporate financial practices as evidenced by its emphasis on transparency and accountability in financial reporting.