Question

Sarbanes-Oxley Act (rules that comply with the fraud triangle) : a. Section 302

b. Section 404
c. Section 802
d. Section 906

Answer 1

The Sarbanes-Oxley Act was created to prevent corporate and accounting fraud by enforcing stricter rules on financial reporting and corporate governance. Sections 302 and 906 concern corporate responsibility for financial reports, 404 addresses internal controls, and 802 provides criminal penalties for document tampering.

Step-by-step explanation:

The Sarbanes-Oxley Act of 2002 was enacted in response to major accounting scandals such as those involving Enron and WorldCom, with the purpose of enhancing the accuracy and reliability of corporate financial reporting. The Act outlines specific provisions to combat corporate and accounting fraud and to protect investors by improving the accuracy and reliability of corporate disclosures.

There are several sections within the Sarbanes-Oxley Act that address various aspects of corporate governance and financial practices:

• Section 302 - Corporate Responsibility for Financial Reports. Executives must personally certify the accuracy of financial reports.
• Section 404 - Management Assessment of Internal Controls. A report on the effectiveness of the internal control structure and procedures for financial reporting is required.
• Section 802 - Criminal Penalties for Altering Documents. This section includes the criminal penalties for altering, destroying, or falsifying records.
• Section 906 - Corporate Responsibility for Financial Reports. Similar to Section 302, with additional certification requirements and penalties.

Each section plays a role in deterring and preventing corporate fraud, thus contributing to the restoration of investor trust in the financial markets.