SOX instituted major changes to the regulation of financial practice and corporate governance. Of the key components of SOX, section 404 has gained the most attention and requires public company auditors to attest to the effectiveness of internal controls and fair presentation of financial statements, in all material respects. The Sarbanes-Oxley Act has greatly impacted the auditing landscape; however, how has it specifically impacted the Banking sector? What are the civil and legal issues and consequences for the auditing profession prior to and subsequent the Sarbanes Oxley Act? How has the Sarbanes-Oxley Act impacted accountants, auditors, and stakeholders of financial institutions?
What does Carmichael see as the underlying mission of the PCAOB? Mr. Carmichael believes that the main directive of PCAOB is to ultimately restore the confidence of the public and investors in the “independent auditors of public companies” accomplished in accordance with the Sarbanes-Oxley ACT Of 2002. This Act empowers the PCAOB to register public accounting firms, perform inspection audits on these firms, investigating, disciplining and imposing rectifying sanctions and by overseeing the standards that these firms need to meet. The act also allows the PCAOB to perform other activities that will further its mission to protect the investors and look out for the public’s interest. 3.
Rule 404(a) specifically requires a statement of managements’ responsibility for establishing and maintaining adequate internal control over financial reporting of the company, their assessment of the effectiveness of the internal controls, and disclosure of material weaknesses. Rule 404(b) requires that the company’s external auditors attest to, and report on, management’s assessment of the effectiveness of the company’s internal control over financial reporting (McGladrey & Pullen,
Case Study 2 FI504 1. If LJB Company decides to go public, there will need to be some changes to their day-to-day operating practices. The Sarbanes-Oxley Act of 2002 (SOX) was put in place by the United States government to require publicly traded corporations to have an adequate system of internal control. External auditors must check the internal control system, and specific requirements must be met. There are five primary components of internal control systems: a control environment, risk assessment, control activities, information and communication, and monitoring.
FI504 – Accounting and Finance Case Study #2 Evaluation of Internal Controls Bruce Van Apeldoorn DeVry University Attention Mr. President, The Sarbanes-Oxley Act of 2002 is a United States federal law which sets new or enhanced standards for all U.S. public companies. The reason that this Sarbanes-Oxley Act of 2002 bill was created was because of a number of major corporate and accounting scandals. When these scandals occurred they cost investors billions in losses because the share prices fell it shook public confidence in our securities markets. That is why it is important to comply with the Sarbanes-Oxley Act of 2002 requirements. This means that LJB would be required to maintain a system of internal control.
In addition, penalties for fraudulent financial activity are much more severe. Also, SOX increased the independence of the outside auditors who review the accuracy of corporate financial statements, and increased the oversight role of boards of directors. If LJB decides to issue stock, company should know how many shares should be authorized for sale and what value should be assigned to the stock. The next issue is internal control. Internal control consists of all the related methods and measures adopted within an organization to safeguard its assets, enhance the reliability of its accounting records, increase efficiency of operations, and ensure compliance with laws and regulations.
Conclusion The recommendation for Future Policy Makers should continue to improve the policies, and procedures that are associated with Sarbanes-Oxley Act of 2002. Lawmakers should address high costs, associated fees and should allow flexibility on time commitment of firms with production and creativities. An organization goal is to make profit. SOX intrude on potential gaining in organizations. No companies should suffer because high auditing fees.
Cynthia Cooper acted very equitable while her team and she audited WorldCom. There were many things that alerted her to the discrepancies within the company. Cooper alludes to the fact that she was first alerted of these discrepancies when former WorldCom financial Analysis was laid off because she had complained about potential abuse is related to capital spending. From there it’s seemed to be a downward spiral. She states that during the auditing process the financial director provided capital spending schedules for the audit and two of them disagreed on amounts.
Sarbanes-Oxley Act Sarbanes-Oxley is a United States federal law, which is also known as the public company accounting reform and investors protection act and corporate and auditing accountability and responsibility act. Sarbox or Sox are shorter names given to the company. Paul Sarbanes (US Senator) and Michael G. Oxley (US Representative) are the ones who support this act. This act is intended to protect investors by improving the precision and consistency of corporate disclosures made pursuant to the security law. It is also there to strengthen audit committees and to create responsibilities for publicity traded corporations, accounting firms and regulatory agencies.
Sarbanes-Oxley Act: Significance [Author’s Name] [Institute’s Name] Introduction The Sarbanes – Oxley Act of 2002, signed by President Bush on 30th July 2002 bestow much tougher regulatory and enforcement powers. The Sarbanes-Oxley Act came into force mainly due to financial scandals committed by corporate giants. After its enforcement accounting system and financial statements exposed by the companies made remarkable progress. This has become possible mainly due to the rigorous requirements stated in the Sarbanes- Oxley Act. This helped the investors to restore their confidence in the companies and U.S legislature as well.