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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

How has the Sarbanes-Oxley Act (SOX) impacted the internal control of companies?

It allows companies to voluntarily disclose internal control weaknesses without penalty.

It eliminates the need for companies to maintain internal controls.

It requires management and external auditors to report on the adequacy of a company's internal control over financial reporting.

It only applies to private companies and has no effect on public companies.

Previous problemNext problem

Verified step by step guidance

Understand the purpose of the Sarbanes-Oxley Act (SOX): SOX was enacted in 2002 to enhance corporate governance and restore investor confidence after major accounting scandals. It primarily applies to public companies and aims to improve the accuracy and reliability of financial reporting.

Focus on the internal control requirements under SOX: Section 404 of SOX mandates that management must assess and report on the effectiveness of the company's internal control over financial reporting. Additionally, external auditors are required to independently evaluate and report on the adequacy of these controls.

Eliminate incorrect options: The statement that SOX allows companies to voluntarily disclose internal control weaknesses without penalty is incorrect because SOX enforces strict compliance and penalties for non-compliance. Similarly, the claim that SOX eliminates the need for internal controls is false, as it actually strengthens the requirement for robust internal controls.

Clarify the scope of SOX: The statement that SOX only applies to private companies is incorrect. SOX primarily applies to publicly traded companies, not private companies, and has a significant impact on their internal control and financial reporting processes.

Identify the correct answer: Based on the requirements of SOX, the correct answer is that it requires management and external auditors to report on the adequacy of a company's internal control over financial reporting. This aligns with the purpose of SOX to ensure transparency and accountability in financial reporting.