Final answer:
The Sarbanes-Oxley Act does not establish audit standards for privately held companies; it is false. Sarbanes-Oxley was instituted in 2002 to prevent accounting fraud and restore confidence in the financial reports of public companies, not private firms.
Step-by-step explanation:
The statement that the Sarbanes-Oxley Act establishes standards related to the audits of privately held companies is false. The Sarbanes-Oxley Act, passed in the wake of several major accounting scandals involving corporations like Enron, Tyco International, and WorldCom, focuses on public corporations. The legislation was enacted in 2002 to restore investor confidence and protect investors from the possibility of accounting fraud by increasing the accuracy of financial disclosures provided by public companies. It also established new or enhanced standards for all U.S. public company boards, management, and public accounting firms.
It is important to note that the requirements set forth by the Sarbanes-Oxley Act, such as stringent rules for financial reporting, the establishment of the Public Company Accounting Oversight Board (PCAOB), and rules regarding the independence of auditors, apply primarily to publicly traded companies and not to private companies. Therefore, Sarbanes-Oxley mainly impacts the audits and corporate governance of public companies rather than privately held firms.