Key Aspect of the Sarbanes-Oxley Act

Hard Corporate Governance Regulatory Environment

Corporate governance mechanisms are essential in maintaining the integrity and transparency of financial reporting. Regulators around the world have instituted various laws to enhance the governance framework of publicly traded companies. In the United States, the Sarbanes-Oxley Act (SOX) was enacted in response to numerous corporate scandals. This legislation introduced several regulations to improve financial disclosures, increase accountability, and deter fraud. As a CFA Level II candidate, you should be familiar with how regulatory environments influence corporate governance practices.

Which of the following statements accurately reflects a key aspect of the Sarbanes-Oxley Act?

The Sarbanes-Oxley Act requires that all public companies establish an independent audit committee composed entirely of internal staff.

The Sarbanes-Oxley Act mandates that audit firms rotate every five years for public companies to mitigate conflicts of interest.

The Sarbanes-Oxley Act requires CEOs and CFOs to certify the accuracy of financial statements under penalty of perjury.

Hint

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