Final answer:
The PCAOB was established by the Sarbanes-Oxley Act of 2002 to oversee the audits of public companies, which was a necessary step in restoring investor confidence following major accounting scandals. The PCAOB itself is not an independent auditor but rather ensures that the auditors of public companies follow strict guidelines to enhance financial reporting quality.
Step-by-step explanation:
The Public Company Accounting Oversight Board (PCAOB) is a pivotal institution created by the Sarbanes-Oxley Act of 2002 in response to major accounting scandals such as those involving Enron and WorldCom. Its establishment was part of a broader legislative effort to enhance the reliability of financial reporting and increase investor confidence.
As for the statements in the question:
- Created PCAOB: True, it was established by the Sarbanes-Oxley Act of 2002.
- Independent auditor: False, PCAOB is not an auditor; it oversees the audits of public companies to ensure they are conducted objectively and reliably.
- Accountability for CEO and CFO: True, the Sarbanes-Oxley Act increased accountability of these executives by requiring them to certify the accuracy of financial statements.
- Mgmt responsibility for internal control: True, part of the Sarbanes-Oxley Act's provisions includes management's responsibility for establishing and maintaining an adequate internal control structure.
- Enhanced the quality of financial reporting: True, by overseeing auditing processes and ensuring compliance with established standards.
- Increased white collar crime penalties: True, Sarbanes-Oxley Act includes provisions that increase penalties for fraudulent financial activity.