What must an auditor now assess according to the Sarbanes-Oxley Act?

The Sarbanes-Oxley Act, enacted in response to major corporate scandals, primarily focuses on enhancing corporate governance and accountability, particularly concerning financial reporting and internal controls. Auditors are now required to assess the adequacy of internal controls over financial reporting. This means that auditors need to evaluate whether the internal controls implemented by a company are sufficient to ensure accurate and reliable financial statements. Effective internal controls help prevent fraud, misstatements, and ensure compliance with applicable laws.

Understanding internal controls is crucial because they form the foundation for reliable financial information that stakeholders depend on for decision-making. The act emphasizes the importance of internal controls because lapses can lead to significant financial misreporting and loss of investor confidence, which can have severe consequences for companies and their stakeholders. Hence, assessing internal controls directly relates to an auditor's responsibility under the Sarbanes-Oxley Act as a means of safeguarding the integrity of financial reporting.