Which Act established strict accounting and reporting rules to improve accountability among senior managers?

The Sarbanes-Oxley Act, enacted in 2002, was established in response to significant corporate accounting scandals, such as those involving Enron and WorldCom. This legislation introduced stringent accounting and reporting requirements with the goal of enhancing corporate governance and accountability among senior management. It mandates that companies must maintain accurate financial records and significantly increases penalties for fraudulent financial activity.

One of the key aspects of the Sarbanes-Oxley Act is the requirement for top executives to personally certify the accuracy and completeness of financial statements, which aims to ensure greater responsibility and transparency in financial reporting. This act also established the Public Company Accounting Oversight Board (PCAOB) to oversee the audits of public companies and enforce compliance with these new regulations. By compelling senior management to take responsibility for their companies’ financial practices, the Sarbanes-Oxley Act has played a crucial role in restoring public trust in the American financial system.