Certified Cloud Security Professional (CCSP) Practice Exam

What is the primary purpose of the Sarbanes Oxley Act (SOX)?

1. Improving healthcare transaction standards

2. Protecting shareholders from accounting errors and fraud

3. Regulating private banking information

4. Managing electronic discovery in legal cases

The correct answer is: Protecting shareholders from accounting errors and fraud

The primary purpose of the Sarbanes-Oxley Act (SOX) is to protect shareholders from accounting errors and fraud. This legislation was enacted in response to several high-profile corporate scandals that occurred in the early 2000s, such as Enron and WorldCom. SOX aims to enhance the accuracy and reliability of corporate disclosures, thereby increasing investor confidence in the integrity of financial statements. The act establishes strict guidelines for financial reporting and internal controls within publicly traded companies. It requires organizations to implement comprehensive measures for accurate financial reporting, which includes the assessment of internal controls. This focus on accountability and transparency is fundamental in safeguarding investors and ensuring the trustworthiness of the financial systems in which they invest. Other choices, while significant in their respective contexts, do not encapsulate the central intent of SOX. For instance, improving healthcare transaction standards is related to the Health Insurance Portability and Accountability Act (HIPAA). Regulating private banking information pertains to the Gramm-Leach-Bliley Act. Managing electronic discovery in legal cases falls under rules and regulations like the Federal Rules of Civil Procedure, rather than SOX.