Which regulation is commonly associated with strengthening internal controls and corporate governance in U.S. public companies?

Which regulation is commonly associated with strengthening internal controls and corporate governance in U.S. public companies?

• A. Role behavior
• B. Sarbanes-Oxley Act [of 2002]
• C. Scaled score
• D. Scatter diagram

Answer: (B)

Strengthening internal controls and corporate governance in U.S. public companies is addressed by the Sarbanes-Oxley Act of 2002. This major regulation was enacted after high-profile corporate scandals to improve the accuracy of financial reporting and the accountability of corporate leaders. It requires management to assess and report on the effectiveness of internal controls over financial reporting, and it mandates independent auditor attestation of that assessment. It also imposes CEO and CFO certification of financial statements, strengthens the independence of the audit committee, and creates the Public Company Accounting Oversight Board to oversee auditors. Provisions like Section 404 focus directly on internal controls, while other sections broaden accountability, oversight, and disclosure requirements. The other options refer to concepts that aren’t regulatory frameworks governing corporate governance or financial reporting.

Strengthening internal controls and corporate governance in U.S. public companies is addressed by the Sarbanes-Oxley Act of 2002. This major regulation was enacted after high-profile corporate scandals to improve the accuracy of financial reporting and the accountability of corporate leaders. It requires management to assess and report on the effectiveness of internal controls over financial reporting, and it mandates independent auditor attestation of that assessment. It also imposes CEO and CFO certification of financial statements, strengthens the independence of the audit committee, and creates the Public Company Accounting Oversight Board to oversee auditors. Provisions like Section 404 focus directly on internal controls, while other sections broaden accountability, oversight, and disclosure requirements. The other options refer to concepts that aren’t regulatory frameworks governing corporate governance or financial reporting.