Which of the following is a provision included in the Sarbanes-Oxley Act?

• A. Mandate for companies to use cash-basis accounting
• B. Requirement for management to certify the accuracy of financial statements
• C. Elimination of the need for external audits
• D. Abolishment of the Securities and Exchange Commission (SEC)

Answer: (B)

Verified step by step guidance

1. Understand the Sarbanes-Oxley Act (SOX): The Sarbanes-Oxley Act was enacted in 2002 to improve corporate governance and accountability in response to major financial scandals. It includes provisions to enhance transparency and prevent fraudulent financial reporting.
2. Review the key provisions of SOX: One of the critical provisions is the requirement for management to certify the accuracy of financial statements. This ensures that executives take responsibility for the integrity of the company's financial reporting.
3. Eliminate incorrect options: The Sarbanes-Oxley Act does not mandate cash-basis accounting, eliminate external audits, or abolish the SEC. These options are inconsistent with the purpose of SOX, which is to strengthen financial oversight and accountability.
4. Focus on the correct provision: The requirement for management to certify the accuracy of financial statements aligns with SOX's goal of improving corporate accountability and preventing fraudulent practices.
5. Conclude the analysis: Based on the review of the provisions, the correct answer is the requirement for management to certify the accuracy of financial statements, as it directly supports the objectives of the Sarbanes-Oxley Act.