Question

Section 404 of SOX requires an assessment of control by using a frame work. This framework was establisted by whom?

A) U.S. Congress
B) Securities and Exchange Commission (SEC)
C) Public Company Accounting Oversight Board (PCAOB)
D) American Institute of Certified Public Accountants (AICPA)

Answer 1

Section 404 of SOX requires the use of a framework established by the Public Company Accounting Oversight Board (PCAOB) to assess control. The Sarbanes-Oxley Act was enacted to safeguard investors by enhancing financial information integrity following significant accounting scandals.The correct option is c.

Step-by-step explanation:

The assessment of control mentioned in Section 404 of the Sarbanes-Oxley Act (SOX) is required to be carried out by using a framework established by the Public Company Accounting Oversight Board (PCAOB). This Act, often referred to as SOX, was enacted in response to a number of major accounting scandals involving corporations such as Enron, Tyco International, and WorldCom. The purpose of the Sarbanes-Oxley Act was to increase confidence in the financial information provided by public corporations and to protect investors from accounting fraud. Furthermore, the Act emphasizes the importance of corporate governance and the role of auditing firms and outside investors to provide checks and balances in the financial reporting process. Unfortunately, there have been instances, such as with Lehman Brothers, where corporate governance failed to deliver accurate financial information to investors, emphasizing the necessity for robust legal and regulatory frameworks like SOX.