Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

6. Internal Controls and Reporting Cash

Sarbanes-Oxley Act

Financial Accounting

6. Internal Controls and Reporting Cash

Sarbanes-Oxley Act

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Multiple Choice

Which of the following statements about the Sarbanes-Oxley Act (SOX) is true?

SOX eliminates the need for external audits of financial statements.

SOX requires public companies to establish internal controls over financial reporting.

SOX was enacted in response to the financial crisis of 2008.

SOX applies only to private companies in the United States.

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Verified step by step guidance

Understand the context of the Sarbanes-Oxley Act (SOX): SOX was enacted in 2002 in response to major corporate scandals such as Enron and WorldCom, not the financial crisis of 2008. Its purpose is to improve corporate governance and accountability.

Clarify the scope of SOX: SOX applies to public companies, not private companies, and is designed to protect investors by ensuring the accuracy and reliability of financial reporting.

Examine the requirement for internal controls: SOX mandates that public companies establish and maintain internal controls over financial reporting. This includes processes to ensure the integrity of financial statements and compliance with regulations.

Address the role of external audits: SOX does not eliminate the need for external audits. In fact, it strengthens the role of external auditors by requiring them to assess the effectiveness of a company's internal controls over financial reporting.

Evaluate the statements provided: Based on the above clarifications, the correct statement is 'SOX requires public companies to establish internal controls over financial reporting.' The other statements are either incorrect or misrepresent the scope and purpose of SOX.