Question

Question: How does the Sarbanes-Oxley Act relate to internal controls?

Answer 1

Step 1: Definition of internal controls

The organizational plan and all the related measures adopted by an entity to safeguard assets, encourage employees to follow company policies, promote operational efficiency, and ensure accurate and reliable accounting records.

 

Step 2: Relation of Sarbanes-Oxley act with internal control

The Sarbanes-Oxley Act relate to internal control because according to this act companies need to review controls and take all the responsibility for the accuracy of the financial reports. This act has a provision that the company must issue an internal control report in which all the responsibility and the accuracy of the financial reports are described.

 

SOX revamped corporate governance in the United States and affected the accounting profession.