According to the Sarbanes-Oxley Act, the responsibility for issuing a report on a company's internal controls over financial reporting rests with:
A.) both the company and its independent auditor.
B.) the company.
C.) the independent auditor.
D.) neither the company nor its independent auditor.
To find the answer to this question, we need to understand the Sarbanes-Oxley Act and its requirements. The Sarbanes-Oxley Act (SOX) was enacted in 2002 to increase corporate accountability and improve the accuracy and reliability of financial reporting in the United States.
Under Section 404 of SOX, companies are required to assess and report on their internal controls over financial reporting (ICFR). This means that companies must have processes in place to ensure that their financial statements are accurate and reliable.
According to SOX, the ultimate responsibility for issuing a report on a company's ICFR rests with the company itself. This means that the company is responsible for evaluating the effectiveness of its internal controls and issuing a report on their adequacy.
However, it is important to note that SOX also requires an independent audit of the company's financial statements, including an evaluation of the company's internal controls. This audit is conducted by an external audit firm, commonly known as the independent auditor.
So, the correct answer to the question is A.) both the company and its independent auditor. While the company is responsible for assessing and reporting on its internal controls, the independent auditor plays a crucial role in evaluating those controls and providing an opinion on their effectiveness.
In summary, under the Sarbanes-Oxley Act, the responsibility for issuing a report on a company's internal controls over financial reporting rests with both the company and its independent auditor.