Free Essays,College Free Essays,Free College Essays at Anti Essays

Introduction
Previous financial scandals and bankruptcies have called for the creation of the Sarbanes-Oxley Act of 2002 (SOX), officially the U. S. Public Company Accounting Reform and Investor Protection Act of 2002. The SOX Act has introduced major changes to the regulation of financial disclosure, corporate governance, and the practice of public accounting. Among many sections within the legislation some sections of the Act are more pertinent than others in the industry. This research will discuss the importance of those sections and how internal controls are affected by the Act.
Internal Control Provisions
Auditors are responsible for testing the scope of an organization’s internal control procedures and present the findings through annual audit reporting’s. “These audit reports must include an evaluation of whether the internal controls provide both a system of maintaining records that fairly and accurately reflect the company’s transactions, and a reasonable assurance that transactions are recorded in accordance with the preparation of Generally Accepted Accounting Rules (GAAP) financial statements; along with a description of any material weaknesses in the internal controls and material non-compliance” (Bloch & Colson, 2003, p.68). An auditor reports his or her findings to an audit committee who then has to determine the approval of services. Any findings of critical accounting errors should be discussed with the audit committee.
Two other key provisions of the Sarbanes-Oxley Act that have affected many businesses in both positive and negative ways when it comes to financial reporting are Sections 302 and 404. “Section 302--Corporate Responsibility for Financial Reports requires that the CEO and CFO of each public company issuing financial reports must prepare a statement that accompanies the audit report to certify the appropriateness of the financial statements and disclosures contained in the periodic report, and that...