Question

Prior to the Sarbanes-Oxley Act of 2002, the _________was responsible for creating all new auditing standards in the United States. Today, for publicly held companies, that responsibility rests with the _____________.

Answer 1

Before the Sarbanes-Oxley Act of 2002, the AICPA was responsible for creating auditing standards in the U.S. The act shifted this responsibility to the PCAOB for public companies, aiming to protect investors and increase confidence in corporate financial information.

Step-by-step explanation:

Prior to the Sarbanes-Oxley Act of 2002, the American Institute of Certified Public Accountants (AICPA) was responsible for creating all new auditing standards in the United States. Today, for publicly held companies, that responsibility rests with the Public Company Accounting Oversight Board (PCAOB). The Sarbanes-Oxley Act was a direct response to major accounting scandals involving prominent corporations such as Enron and WorldCom. Its implementation was meant to restore confidence in financial information provided by public corporations and thereby protect investors from accounting fraud.

One critical change instigated by the act was the shift of auditing standards authority from the AICPA to the PCAOB for publicly traded companies to strengthen corporate governance and provide more rigorous oversight of corporate financial practices. Prior to the Sarbanes-Oxley Act of 2002, the Auditing Standards Board (ASB) was responsible for creating all new auditing standards in the United States. Today, for publicly held companies, that responsibility rests with the Public Company Accounting Oversight Board (PCAOB).