Which of the following is NOT a provision of the Sarbanes-Oxley Act?

• A. Requirement for management to certify the accuracy of financial statements
• B. Mandatory rotation of audit firms every three years
• C. Increased penalties for fraudulent financial activity
• D. Establishment of the Public Company Accounting Oversight Board (PCAOB)

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, prevent fraud, and ensure the accuracy of financial reporting.
2. Review the listed provisions: Carefully examine each option provided in the question to determine whether it aligns with the requirements of the Sarbanes-Oxley Act.
3. Analyze the first option: 'Requirement for management to certify the accuracy of financial statements'—this is a key provision of SOX under Section 302, which mandates that senior management must certify the accuracy of financial reports.
4. Analyze the second option: 'Mandatory rotation of audit firms every three years'—this is NOT a provision of SOX. While SOX emphasizes auditor independence, it does not require mandatory rotation of audit firms every three years. Instead, it requires rotation of the lead audit partner every five years.
5. Analyze the remaining options: 'Increased penalties for fraudulent financial activity' and 'Establishment of the Public Company Accounting Oversight Board (PCAOB)'—both are provisions of SOX. The PCAOB was established to oversee the audits of public companies, and SOX increased penalties for fraud to deter unethical behavior.