How the Sarbanes-Oxley Act Will Impact the Audit Function

2015 WordsJan 28, 20069 Pages
Before the Enron-Arthur Anderson scandal, auditors were generally viewed as independent and trustworthy professionals. They protected the interests of the individual investor by ensuring that corporations presented financial statements that accurately reflected the financial results of operations. The auditor was trusted to present the facts as he saw it, regardless of the implications. When events such as the academy awards used the services of a CPA, it was done not because the counting of ballots was a technically difficult task, but because people believed CPA's could be trusted. The recent problems encountered by many of the nations top accounting firms "has taken something important from all accountants: the assurance that…show more content…
If an auditor is asked by a client to be involved in its evaluation of internal controls, the auditor should make sure that nothing is done to impair the appearance of objectivity and independence. The auditor may help in the gathering and preparation information as long as management directs the entire process, and is responsible for documenting controls. In order to ensure a consistent and comprehensive companywide process, auditors are recommending that their clients establish project teams that report directly to the CEO or CFO (McConnell, Banks, 2003). . As a result of the Sarbanes-Oxley Act, a variety of methods used by auditors in the past to enhance audit efficiency and effectiveness will no longer be acceptable for integrated audits of public companies. Auditors sometimes used cycle rotation to test controls, this involved testing of controls in several areas of a firm's transaction cycles while doing a transaction walk-through to confirm the absence of control changes in the remaining cycles. This practice will no longer be acceptable in public company audits, since auditors must now report comprehensively on the effectiveness of management's internal control over financial reporting on an annual basis. Due to inherent limitations of internal controls, and the risk of management override, auditors will have to perform tests of details and analytical procedures for each material account balance or class of

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