Certified in Healthcare Compliance (CHC) Practice Test

Which legislation was created to improve corporate governance after early 2000s financial scandals?

1. Sarbanes-Oxley Act

2. Health Insurance Portability and Accountability Act

3. Affordable Care Act

4. Emergency Medical Treatment and Labor Act

The correct answer is: Sarbanes-Oxley Act

The Sarbanes-Oxley Act was established in response to significant corporate financial scandals involving companies like Enron and WorldCom in the early 2000s. This legislation aimed to enhance corporate governance and accountability in publicly traded companies. It implemented stricter regulations on financial reporting and auditing processes, requiring companies to establish internal controls to prevent and detect fraud. Additionally, the Sarbanes-Oxley Act created independent oversight bodies, such as the Public Company Accounting Oversight Board (PCAOB), to oversee audits and ensure compliance with the law. This legislation also increased penalties for fraudulent financial activity and protected whistleblowers, contributing to greater transparency and accountability within corporate financial practices. In contrast, the other options focus on different areas: the Health Insurance Portability and Accountability Act is primarily concerned with healthcare privacy and data security; the Affordable Care Act aims to reform health insurance and increase access to healthcare; and the Emergency Medical Treatment and Labor Act is focused on ensuring patient access to emergency medical services. Each of these pieces of legislation addresses distinct issues, which underscores why the Sarbanes-Oxley Act is the correct answer for questions regarding corporate governance in the wake of financial scandals.