Question

The Sarbanes-Oxley Act of 2002 requires management to include a report on the effectiveness of ICFR in the entity's annual report. It also requires auditors to report on the effectiveness of ICFR. Which of the following statements concerning these requirements is false?

A. The auditor should provide recommendations for improving internal control in the audit report
B. Management's report should state its responsibility for establishing and maintaining an adequate control system
C. Management should identify material weaknesses in its report
D. The auditor should evaluate whether internal controls are effective in accurately and fairly reflecting the firm's transactions

Answer 1

A. The auditor should provide recommendations for improving internal control in the audit report

The false statement is that auditors are required to provide recommendations for improving internal control in their audit report; while they evaluate the effectiveness, they do not include improvement recommendations in the report.

Step-by-step explanation:

The Sarbanes-Oxley Act of 2002 requires both management and auditors to report on the effectiveness of a company's Internal Control over Financial Reporting (ICFR).

Specifically, management's report should state its responsibility for establishing and maintaining an adequate internal control system and should identify any material weaknesses.

When it comes to the auditor's responsibilities, the false statement among the options provided is that the auditor should provide recommendations for improving internal control in the audit report.

Auditors are required to evaluate the effectiveness of ICFR, not to provide recommendations within their audit report.

The false statement is that auditors are required to provide recommendations for improving internal control in their audit report; while they evaluate the effectiveness, they do not include improvement recommendations in the report.