What is the purpose of the Sarbanes-Oxley Act of 2002?

• A. Expanded refugee admissions.
• B. Required six weeks of paid leave.
• C. Strengthened corporate governance and financial disclosure; established the Public Company Accounting Oversight Board.
• D. Abolished the SEC.

Answer: (C)

The main idea behind the Sarbanes-Oxley Act is to restore trust in financial reporting by tightening how corporations are governed and how they disclose information, plus it created a new entity to oversee audits. After major scandals, lawmakers pushed for stronger oversight of corporate governance and financial statements, to reduce fraud and improve transparency. Central to that was establishing the Public Company Accounting Oversight Board to supervise the audits of public companies, ensuring auditors are independent and follow consistent standards. The act also strengthens internal controls and requires top executives to personally certify the accuracy of financial reports, further tying governance and disclosure to accountability. Choices about refugee policy, paid leave, or abolishing the SEC don’t address these reforms, and the act did not abolish the SEC; it works alongside it by adding auditor oversight through the PCAOB.