American Institute of Certified Public Accountants (AICPA) Practice Exam

The Sarbanes-Oxley Act (SOX) was enacted in 2002 in response to major financial scandals in the early 2000s, such as those involving Enron and WorldCom. A primary focus of the Act is investor protection. It aims to enhance the accuracy and reliability of corporate disclosures made pursuant to the securities laws. To achieve this, SOX established stricter regulations on financial reporting and instituted penalties for fraudulent financial activity.

The Act introduced provisions requiring companies to implement greater internal controls over financial reporting, which helps to protect investors by ensuring that they receive accurate and truthful information about the companies in which they invest. Additionally, SOX created the Public Company Accounting Oversight Board (PCAOB) to oversee the audits of public companies, further safeguarding investor interests.

The other choices, such as tax reduction, business expansion, and accounting simplification, do not capture the primary purpose of the Sarbanes-Oxley Act. While SOX may indirectly influence business operations and accounting practices, its core emphasis remains on protecting investors through enhanced corporate governance and financial transparency.