Because of the Sarbanes-Oxley Act, which of the following is now required of publicly traded companies in the United States?

• A. Management must certify the accuracy of financial statements.
• B. Auditors are allowed to provide unlimited consulting services to audit clients.
• C. Companies are exempt from internal control audits.
• D. Only private companies must disclose financial information.

Answer: (A)

Verified step by step guidance

1. Understand the Sarbanes-Oxley Act (SOX): This legislation was enacted in 2002 to improve corporate governance and accountability in response to financial scandals. It applies to publicly traded companies in the United States.
2. Identify the key requirements of SOX: One of the primary provisions is that management must certify the accuracy of financial statements. This ensures accountability and reduces the risk of fraudulent reporting.
3. Evaluate the incorrect options: Auditors are not allowed to provide unlimited consulting services to audit clients under SOX, as this could create conflicts of interest. Companies are not exempt from internal control audits; in fact, SOX emphasizes the importance of internal controls. Lastly, SOX applies to publicly traded companies, not private companies, which are not required to disclose financial information under this act.
4. Focus on the correct answer: The requirement that management must certify the accuracy of financial statements is a cornerstone of SOX, ensuring transparency and reliability in financial reporting.
5. Summarize the reasoning: The Sarbanes-Oxley Act aims to protect investors by improving the accuracy and reliability of corporate disclosures. The correct answer aligns with this goal by holding management accountable for the financial statements they present.