The Sarbanes-Oxley Act (SOX)
Question
In the wake of many scandals with major corporations involving fraud and the deception of investors and regulators, which of the following laws was passed to govern accounting and financial records and disclosures?
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Explanations
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The Sarbanes-Oxley Act (SOX) regulates the financial and accounting practices used by organizations in order to protect shareholders from improper practices and accounting errors.The Health Insurance Portability and Accountability Act (HIPAA) pertains to the protection of patient medical records and privacy.
The Gramm-Leach-Bliley Act (GLBA) focuses on the use of PII within financial institutions.
The Safe Harbor program was designed by the US government as a way for American companies to comply with European Union privacy laws.
The law that was passed to govern accounting and financial records and disclosures in the wake of many scandals with major corporations involving fraud and deception of investors and regulators is the Sarbanes-Oxley Act (SOX).
The Sarbanes-Oxley Act, also known as the Public Company Accounting Reform and Investor Protection Act of 2002, is a United States federal law that was enacted in response to the financial scandals of the early 2000s, such as Enron and WorldCom. The act was named after its sponsors, Senator Paul Sarbanes and Representative Michael Oxley.
SOX aims to improve the accuracy and reliability of corporate disclosures by setting new or enhanced standards for financial reporting, internal controls, and audit procedures for publicly traded companies. It establishes a new oversight board for accounting practices, requires certification of financial statements by CEOs and CFOs, and imposes stricter penalties for fraudulent activities. The act also provides protections for whistleblowers and encourages them to report suspected violations.
GLBA (Gramm-Leach-Bliley Act) is a law that requires financial institutions to protect the privacy of customer information. Safe Harbor is an agreement between the European Union and the United States that establishes data privacy standards for data transfers. HIPAA (Health Insurance Portability and Accountability Act) is a law that establishes national standards for electronic health care transactions and patient privacy. These laws do not address accounting and financial records and disclosures.
