The passage of the Sarbanes-Oxley Act of 2002 was immediately preceded and led by which event?

• A. Dot-com bubble
• B. Enron scandal
• C. Global Financial Crisis
• D. Oil Crisis

Answer: (A)

The event driving the passage of the Sarbanes-Oxley Act was the massive corporate accounting scandals that shook investor confidence in the early 2000s, especially the Enron collapse. Enron’s use of off-balance-sheet entities and complex, misleading accounting hid debt and inflated profits, revealing serious weaknesses in governance, auditing, and internal controls. This stark loss of trust among investors and lenders pushed lawmakers to create stronger rules for financial reporting, corporate responsibility, and auditor independence, which became the core of SOX.

Other options don’t fit as directly. The dot-com bubble burst around 2000 did affect markets but was not the immediate catalyst for SOX. The Global Financial Crisis happened later, in 2007–2008, and the Oil Crisis isn’t related to corporate governance legislation.