Employment Law Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

The Sarbanes-Oxley Act, enacted in 2002 in response to numerous corporate scandals, has several key provisions aimed at improving corporate governance and financial practices. One of the notable consequences of the Act is its emphasis on corporate accountability, particularly regarding the reporting of unethical or illegal behavior.

The Act requires publicly traded companies to establish mechanisms for employees to report any suspected fraudulent activities or violations of securities laws. This includes the creation of procedures for whistleblowers to report misconduct safely and confidentially, without fear of retaliation. The significance of this provision lies in its encouragement of transparency and accountability within corporations, as it seeks to protect individuals who may be aware of wrongdoing and removes barriers to reporting unethical behavior.

While the Act does promote employee training in ethics and correct procedures for reporting, its most notable contribution to corporate governance is the mandated requirement for reporting unethical behavior. This aspect strengthens oversight and promotes an ethical corporate culture, deterring potential wrongdoing at the executive level and within the organization at large. Therefore, the requirement for reporting unethical behavior is a central focus of the Sarbanes-Oxley Act and serves as a crucial element in improving corporate governance standards.