Which legislation requires publicly traded companies to establish and maintain internal controls?

The Sarbanes-Oxley Act is the legislation that mandates publicly traded companies to establish and maintain internal controls over financial reporting. Passed in response to major corporate accounting scandals such as Enron and WorldCom, the act was designed to protect investors by improving the accuracy and reliability of corporate disclosures. It specifically requires companies to implement processes to ensure the integrity of their financial statements, which includes the establishment of internal control frameworks.

These internal controls help to prevent fraud and ensure compliance with regulations, thereby fostering transparency and accountability within corporations. In addition, senior management and executives are required to certify the accuracy of financial reports, which further enforces the need for robust internal control systems. The Sarbanes-Oxley Act highlights the importance of effective governance in maintaining investor confidence and securing the financial well-being of publicly traded companies.