Final answer:
The Sarbanes-Oxley Act is significant to the accounting profession as it compels management to personally certify the effectiveness of internal controls, enhancing investor protection and corporate governance in response to past accounting scandals.
Step-by-step explanation:
The importance to the accounting profession of the Sarbanes-Oxley Act is that it requires management to certify the internal control system. Enacted in 2002, in response to major accounting scandals with corporations like Enron and WorldCom, the Sarbanes-Oxley Act aimed to increase confidence in the financial information provided by public corporations and thereby protect investors from accounting fraud. It also imposed stricter oversight on auditing firms, reinforced corporate governance, and set new penalties for non-compliance. Importantly, the act holds management accountable for the accuracy of financial statements by mandating that they personally certify the effectiveness of the internal controls over financial reporting.
Institutions of corporate governance such as the board of directors, auditing firms, and outside investors play essential roles in overseeing corporate activities and ensuring transparency. However, prior to Sarbanes-Oxley, lapses in this governance were evident, as seen with Lehman Brothers, where accurate financial information was not provided to investors. This act established additional checks to prevent such failures in the future.