Final answer:
The Sarbanes-Oxley Act does not establish standards for audits of privately held companies but rather for public corporations, to protect investors from accounting fraud after major financial scandals.
Step-by-step explanation:
The student asked whether the Sarbanes-Oxley Act establishes standards related to the audits of privately held companies. The correct answer is B) False. The Sarbanes-Oxley Act was passed in 2002 primarily in response to major accounting scandals with corporations such as Enron and WorldCom. Its main objective is to increase confidence in the financial information provided by public corporations and to protect investors against accounting fraud by improving the accuracy of corporate disclosures.
Furthermore, Sarbanes-Oxley introduced stringent rules for corporate governance and accounting practices, including the establishment of an independent board to oversee the conduct of auditors, stronger internal controls, and increased penalties for corporate wrongdoing. While Sarbanes-Oxley has had widespread implications for corporate America, it directly applies to publicly traded companies rather than privately held ones.
The statement is False. The Sarbanes-Oxley Act does not establish standards related to the audits of privately held companies. It was enacted in response to major accounting scandals involving public corporations, such as Enron, Tyco International, and WorldCom. The act aims to increase confidence in financial information provided by public corporations and protect investors from accounting fraud.