Question

(LO 4)

After the passage of the Sarbanes-Oxley Act:

A) Reports prepared by managerial accountants must be audited by CPAs.
B) CEOs and CFOs must certify that financial statements give a fair presentation of the company's operating results.
C) The audit committee, rather than top management, is responsible for the company's financial statements.
D) Reports prepared by managerial accountants must comply with generally accepted accounting principles (GAAP).

Answer 1

The correct answer is B) CEOs and CFOs must certify that financial statements give a fair presentation of the company's operating results, as mandated by the Sarbanes-Oxley Act to strengthen corporate governance and financial disclosure.

Step-by-step explanation:

After the passage of the Sarbanes-Oxley Act, CEOs and CFOs must certify that financial statements give a fair presentation of the company's operating results.

The Act was designed in response to major accounting scandals to increase confidence in financial information provided by public corporations and protect investors from accounting fraud. Particularly, it aimed to improve corporate governance and restore investor trust by implementing stricter regulatory standards.

The Board of Directors, elected by the shareholders, is considered the first line of corporate governance and oversight. However, in light of previous governance failures, as seen in the case of Lehman Brothers, the Sarbanes-Oxley Act introduced additional levels of oversight.

Answer B) CEOs and CFOs must certify that financial statements give a fair presentation of the company's operating results is the correct choice addressing the certification of financial statements according to the Sarbanes-Oxley Act.