Final answer:
The Sarbanes-Oxley Act holds executives of MNCs more accountable for their financial statements and aims to prevent accounting fraud. It focuses on ensuring that the board of directors, auditing firms, and outside investors are effective in governance roles.
Step-by-step explanation:
The Sarbanes-Oxley Act, enacted as a reaction to major accounting scandals such as those involving Enron and WorldCom, significantly improves corporate governance of Multinational Corporations (MNCs). One of the key provisions of this act makes executives more accountable for the accuracy of financial statements. This accountability is established through requirements for top executives to personally certify the financial reports, thereby aiming to ensure the integrity and transparency of financial disclosures.
The board of directors, auditing firms, and outside investors are integral to corporate governance structures that the Sarbanes-Oxley Act aims to strengthen. Prior to the act's implementation, failures in these governance institutions had severe consequences, as seen with Lehman Brothers, where inadequate governance led to misinformation about the firm's financial health, ultimately contributing to its collapse.