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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Conceptual Framework of Corporate Governance

A US-listed energy company collapsed in 2001 after concealing debts through off-balance-sheet entities, and its auditor was implicated. The US Congress responded with a 2002 statute requiring CEO/CFO certification of financial statements and stronger auditor independence. Which statute, and which key event led to it?

The statute is the Sarbanes-Oxley Act of 2002, enacted after the Enron collapse in 2001 involving hidden debts and auditor failure. It required CEO and CFO certification of financial statements, strengthened auditor independence and internal controls, and created the PCAOB to oversee auditors.

  1. ASarbanes-Oxley Act, following the Enron failureCorrect
  2. BDodd-Frank Act, following the Lehman failure
  3. CCadbury Code, following the Maxwell failure
  4. DCompanies (Amendment) Act, following the Satyam failure

Explanation

The Sarbanes-Oxley Act of 2002 followed Enron (2001) and similar scandals, introducing CEO/CFO certification and auditor independence rules. Dodd-Frank followed the 2008 crisis. Cadbury is a UK code not a statute, and the Indian Satyam case came in 2009.

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