Question

The internal control provisions of the Sarbanes-Oxley Act of 2002 apply to which companies in the United States?

1) PubLiCly traded companies
2) Privately held companies
3) Non-profit organizations
4) Government agencies

Answer 1

The Sarbanes-Oxley Act of 2002, enacted in response to accounting scandals, applies to publicly traded companies and aims to protect investors by improving the accuracy of corporate disclosures and financial reporting.

Step-by-step explanation:

The internal control provisions of the Sarbanes-Oxley Act of 2002 apply to publicly traded companies in the United States. This legislation was created in response to a series of major accounting scandals, including those involving Enron, Tyco International, and WorldCom. The main objective of the Sarbanes-Oxley Act is to enhance the accuracy and reliability of corporate disclosures and to protect investors by improving the overall quality of corporate governance and financial reporting.

Under this act, the board of directors, auditing firms, and outside investors play significant roles in ensuring corporate governance. The board of directors is the first line of corporate governance, while auditing firms provide additional oversight by reviewing the company's financial records. Outside investors, especially those who control large investments, rely on accurate and transparent financial information to make informed decisions.