Internal Audit Challenges And Effects Of Sarbanes Oxley Act

The purpose of this paper is to discuss the SEC’s influence on auditing a private company and the essential activities involved in the initial planning of an audit. Next the discussion will delve into four stages of the audit and tasks performed by the auditors as well as internal control findings and various aspects of the audit.

With the induction of SOX, Section 301 dictates that the boards of directors for each publicly traded organization are required to fund and create an internal audit committee or have the entire board serve as the committee, with a minimum of three independent members, accountable for selecting and directing an external independent accounting firm responsible for confirming the integrity of the organization’s financial reports, and creating a process to address

As a result of SOX, top management must individually certify the accuracy of financial information. In addition, penalties for fraudulent financial activity are much more severe. Also, SOX increased the oversight role of boards of directors and the independence of the outside auditors who review the accuracy of corporate financial statements.[1]

The Sarbanes-Oxley Act (SOX) was passed by Congress in 2002 as a response to large corporate accounting fraud scandals that resulted from blatant abuse of self-regulation. SOX “is the most far-reaching and significant new federal regulatory statute affecting accountants and governance since the Securities Acts of 1933 and 1934” (Wegman, 2007). The main goal of SOX was to protect investors from fraud by strengthening oversight and improving internal control. In the discussion below are the advantages and disadvantages of SOX as well as an opinion regarding how successful, or unsuccessful, the SOX regulations were for the prevention of fraud and protection of small business.

On July 30, 2002, George Bush signed into law the Sarbanes-Oxley Act. This act was a product of the collapse of major corporations such as Enron, Global Crossing, Adelphia, and WorldCom. “All four companies allegedly hid their true financial conditions from creditors and shareholders until an inability to meet financial commitments forced these companies to restate earnings and reveal massive losses. The financial collapse of these corporations, a result of allegedly fraudulent accounting practices, created a ripple effect that weakened a stock market already deflated by both the bursting of the technology bubble in 2000 and investor uncertainty resulting from the terrorist attacks of September 11, 2001(Recine, 2002).” In order to prevent

After a prolonged length of corporate scandals involving big public businesses from 2000 to 2002, the Sarbanes-Oxley Act changed into enacted in July 2002 to restore buyers' self-belief in markets and near loopholes for public groups to defraud traders. The act had a profound effect on company governance within the country. The Sarbanes-Oxley Act requires public groups to bolster audit committees, carry out inner controls assessments, set personal liability of directors and officers for accuracy of financial statements, and enhance disclosure. The Sarbanes-Oxley Act also establishes stricter crook consequences for securities fraud and changes how public accounting companies operate their corporations.

With regards to internal control and evaluation, the “Sarbanes-Oxley Act of 2002” is the manuscript to address fraud and risking the trustworthiness of the corporation.

While researching whether or not The Sarbanes–Oxley Act of 2002 (SOX) was the correct decision at the time, there was no lack of information to be found. There are thousands of conflicting articles on both sides of the isle. My thought is, although it has brought to light the need for a higher ethical standard within the accounting industry, to task the government the job of regulating morality simply does not work.

It’s difficult to say if executive compensation at current levels are unethical. I fully understand that fact that some positions are salary based, hold more responsibility, and are more liable when there is a conflict, but I do not agree with the amounts in which they are compensated. When a company sets large compensation rewards for only certain levels it limits the income or assets to award lower levels employees. One must consider that each employee is a cog/gear within a machine and if not maintained properly or replace then problems come about with the functionally to operate. I believe that once an employee has retained so many years of employment there should be some type of compensation. I would recommend that after each third year a

In order to protect a company or a business it relies that each quarterly report financial issues has to be authorized and confirmed by the executive officer or chief financial officer. Therefore, companies are required to have an internal auditor that is certified by an external auditor. The Sarbanes-Oxley Act or SOX affects not only the financial corporations, but also IT departments that are in charge of storing electronic records for companies. The act states that the records should not be

audit committee must include a member who is a financial expert. A financial expert is

The Sarbanes-Oxley act of 2002, Was established for public governance and financial reporting their obligations and redesigned accounts (Ferrell, Hirt, Ferrell 2009). I feel that this act was an important stepping stone in the right direction This would keep other companies from going down large sums of money. Sarbanes-Oxley was a good Act with in response to the financial scandals that plagued Enron and WorldCom. Before 2001, firms were not as closely monitored by investors, and were more likely to make decisions without any rules or regulation (Madura, Ngo 2010) The scandals of Enron and WorldCom shook consumer faith and confidence in the corporate management of private organizations. People, Customer, Employees lost a lot of trust from this

It has been over a decade since these regulatory tools took effect. Even though they helped to reveal fraud and unethical behaviors within organizations, it seems like there are still issues and things that need to be worked on. One of the negative aspects of Sarbanes-Oxley Act is that companies incurred significant costs to comply with its requirements. (Lawrence, 2013) A lot of companies believed that there were more costs than benefits from these implementations.

The Sarbanes–Oxley Act which is also popularly known as the public company accounting reforms is considered as one of the landmark acts if one talks about the way the internal controls are talked about. What this act has done is that it has set pretty much the new and much more controlled requirements as far as the management of the public limited companies is concerned and how they are supposed to take care of their management and overall business conduct (Hostak et al, 2013). At the same time, the interesting thing about the fact is that there are some provisions of the act that also apply to the public accounting firms (Hostak et al, 2013).

The Sarbanes-Oxley Act (SOX) was enacted in July 30, 2002, by Congress to protect shareholders and the general public from fraudulent corporate practices and accounting errors and to maintain auditor independence.   In protecting the shareholders and the general public the SOX Act is intended to improve the transparency of the financial reporting.   Financial reports are to be certified by the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) creating increased responsibility and independence with auditing by independent audit firms. In discussing the SOX Act, we will focus on how this act affects the CEOs; CFOs; outside independent audit firms; the advantages and a