Question

In their Principles of Financial Accounting class, Batini has been studying the Sarbanes-Oxley Act. Which of the following is not a key component of the act?

A) Increased corporate responsibility and accountability.

B) Establishment of the Public Company Accounting Oversight Board (PCAOB).

C) Enhancement of auditor independence and oversight.

D) Elimination of income tax for corporations.

Answer 1

The key components of the Sarbanes-Oxley Act include increased corporate responsibility and accountability, establishment of the PCAOB, and enhanced auditor independence, while the elimination of income tax for corporations is not a component of the act.

Step-by-step explanation:

The Sarbanes-Oxley Act has several key components that were established in response to major accounting scandals involving corporations such as Enron, Tyco International, and WorldCom. These components include:

• Increased corporate responsibility and accountability, which requires top executives to personally certify the accuracy of financial statements.
• The establishment of the Public Company Accounting Oversight Board (PCAOB), which is responsible for overseeing the audits of public companies in order to protect investors.
• Enhancement of auditor independence and oversight, to ensure that the auditing process is objective and thorough.

Considering these key aspects, the option that is not a component of the Sarbanes-Oxley Act is:

• D) Elimination of income tax for corporations.

Option D is not part of the act, as the Sarbanes-Oxley Act is focused on corporate governance and the integrity of financial reporting, rather than on corporate tax policies.