Final answer:
The Sarbanes-Oxley Act is a legislation introduced in 2002 post accounting scandals to enhance financial disclosure, establish strict internal controls, increase penalties for fraud, and require personal certification of financial statements by corporate executives.
Step-by-step explanation:
The Sarbanes-Oxley Act was enacted in 2002 in response to major accounting scandals involving corporations such as Enron and WorldCom. Some key provisions of this legislation include: Enhanced financial disclosures requiring companies to provide more transparent and detailed reporting of their financial condition.
Mandatory internal controls, ensuring that processes for financial reporting are accurate and verifiable. Increased penalties for corporate fraud, serving as a deterrent against fraudulent activities by executives. Requirements for CEOs and CFOs to certify the accuracy of financial statements, thereby holding them personally accountable.
Establishment of the Public Company Accounting Oversight Board (PCAOB) to oversee the audits of public companies. These provisions were designed to rebuild investor trust and improve the integrity of financial reporting. Contrary to any options suggesting reduced penalties or loosening audit requirements, the Act actually increased scrutiny and accountability within the corporate sector.