Corporate governance has become increasingly important over the years. The Sarba

Question

Corporate governance has become increasingly important over the years. The Sarbanes-Oxley (SOX) Act was enacted to improve transparency in financial accounting and to prevent fraud. Which of the following is correct?

A. fraud has not occurred since enactment of SOX

B. SOX has not increased auditing costs

C. government agencies are not required to comply with SOX

D. SOX requires companies to have a strong board of directors

E. none of the above

A. fraud has not occurred since enactment of SOX

B. SOX has not increased auditing costs

Explanation / Answer

SOX (Sarbanes Oxley Act) is mainly focused to the change in federal securities law in the interest of shareholders. This law affects all companies which have presence in the U.S. If a company does not comply with the rules of this law, then it (the company) would face criminal and civil penalties as per the provision under this law.

State and local government bodies are required to report their financial statements under federal financial reporting requirements, but these agencies (government agencies) are not required to comply with the rules of SOX.

Thus, the correct answer is option c.

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