Question

In 2002, in response to an outbreak of corporate scandals and unethical financial and accounting behavior, Congress passed the Sarbanes-Oxley Act. Which of the following is a major provision of this legislation?

a.A publicly traded corporation can refuse to provide requested additional information regarding the procedures used to prepare and report the firm's financial statements.
b.The CEO and the CFO must both individually sign and certify the accuracy of the firm's financial statements before these statements are submitted to the Securities and Exchange Commission.

Answer 1

The Sarbanes-Oxley Act requires the CEO and CFO to individually certify the accuracy of their company's financial statements before submission to the SEC, increasing accountability and protecting investors.

Step-by-step explanation:

In 2002, the Sarbanes-Oxley Act was enacted in response to a series of corporate scandals involving companies like Enron and WorldCom. These events undermined investor confidence and highlighted the need for stricter financial governance and transparency.

One major provision of this legislation is that the CEO and CFO of a publicly traded corporation must both individually certify the accuracy of the firm's financial statements before these statements are submitted to the Securities and Exchange Commission (SEC).

This requirement is aimed at increasing accountability and ensuring that the information provided to investors is accurate and reliable.

The provision directly contradicts the notion that a corporation can refuse to provide additional information about its financial reporting processes, instead mandating senior management to be actively involved and responsible for their company's financial disclosures.