Which act affects publicly traded corporations by requiring certain accounting methods and financial reporting?

• A. Health Insurance Portability and Accountability Act (HIPAA)
• B. Gramm-Leach-Bliley Act (GLBA)
• C. Federal Information Security Management Act (FISMA)
• D. Sarbanes-Oxley (SOX)

Answer: (D)

This question is about a law that directly governs how public companies handle accounting and financial reporting. The act that does this is Sarbanes-Oxley. It was enacted to improve the accuracy and reliability of corporate disclosures by imposing strict requirements on internal controls and financial reporting. The core idea is that management must assess and report on the effectiveness of internal controls over financial reporting, and the CEO and CFO must certify the financial statements. External auditors also attest to the state of those internal controls, with significant penalties for fraudulent reporting. This combination ensures accountability in financial reporting for publicly traded companies.

HIPAA focuses on protecting health information, GLBA governs privacy of consumer financial data, and FISMA sets security requirements for federal information systems. None of these mandate the accounting methods and financial reporting controls required by Sarbanes-Oxley.