Answer
The Sarbanes-Oxley Act of 2002
Explanation:
The Sarbanes-Oxley Act of 2002 is a federal law that was passed by the United States Congress in response to a series of high-profile corporate accounting scandals. The Act was designed to improve corporate accountability and to protect investors by increasing transparency in financial reporting. One of the key provisions of the Act was the establishment of the Public Company Accounting Oversight Board (PCAOB), which is responsible for overseeing the auditing of public companies.
The PCAOB is an independent, non-profit organization that is governed by a board of five members, who are appointed by the Securities and Exchange Commission (SEC). The PCAOB sets auditing standards and conducts inspections of accounting firms that audit public companies. The Act also provides protection to whistle-blowers who report corporate fraud, and it prohibits companies from offering loans to their executives.
The Sarbanes-Oxley Act requires public companies to provide more financial literacy to their boards of directors and to hold executives responsible for any errors or omissions in financial reporting. The Act also requires companies to establish internal controls and to have their financial statements audited by independent auditors. These measures are designed to ensure that companies provide accurate and reliable financial information to investors and the public.
Reference
Wiley CIA Exam Review 2013, Internal Audit Knowledge Elements
By S. Rao Vallabhaneni
