Question

Which of the following is a requirement of the Sarbanes-Oxley Act?

a) The outside auditor must issue an internal control report for each public company, and the Public Company Oversight Board evaluates the client's internal controls.
b) The Public Company Oversight Board issues an internal control audit report for every publicly held company.
c) Accounting firms may not both audit a public client and also provide certain consulting services for the same client.
d) Public companies oversee the work of auditors of other public companies.

Answer 1

The Sarbanes-Oxley Act requires public companies to oversee the work of auditors of other public companies.

Step-by-step explanation:

The Sarbanes-Oxley Act, enacted in 2002 in response to accounting scandals involving corporations like Enron and WorldCom, imposes strict requirements on public companies to protect investors and ensure the accuracy and transparency of financial information. One of the requirements of the Sarbanes-Oxley Act is that public companies must oversee the work of auditors of other public companies.

This requirement aims to enhance the independence and effectiveness of auditors by promoting accountability and oversight. By overseeing the work of auditAors, public companies can ensure that auditors maintain professional standards and ethics, and provide reliable and accurate financial information.

For example, if a public company is auditing another public company, it needs to ensure that the audit is conducted impartially and without any conflicts of interest. By having public companies oversee the work of auditors, it helps prevent potential fraud or misreporting that could harm investors' interests.