Sarbanes-Oxley Act Of 2002 Case Study

The Sarbanes-Oxley Act of 2002 (SOX), also known as the Public Company Accounting Reform and Investor Protection Act and the Auditing Accountability and Responsibility Act, was signed into law on July 30, 2002, by President George W. Bush as a direct response to the corporate financial scandals of Enron, WorldCom, and Tyco International (Arens & Elders, 2006; King & Case, 2014;Rezaee & Crumbley, 2007). Fraudulent financial activities and substantial audit failures like those of Arthur Andersen and Ernst and Young had destroyed public trust and investor confidence in the accounting profession. The debilitating consequences of these perpetrators and their crimes summoned a massive effort by the government and the accounting profession to fight all forms of corruption through regulatory, legal, auditing, and accounting changes.

In a recent article in the New York Times, Sarbanes-Oxley, Bemoaned as a Burden, Is an Investor’s Ally, by Gretchen Morgenson, is about some challenging the requirements that were put in place and the cost to the company’s. According to Morgenson, Tom Farley is one that is an outspoken critic of the law requiring outside auditor to attest on the management’s internal controls on the financial statements. He attributes the decline in corporations in the Unites States.

Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users (Boynton & Johnson, 2006). In auditing there are many attributes that describes the auditor’s work. Elements of the Generally Accepted Auditing Standards are followed by auditors. The Generally Accepted Auditing Standards apply to financial, operational, and compliance audits. Auditing public traded companies has been effected by the Sarbanes-Oxley Act of 2002, and the Public Company Accounting Oversight Board. Auditors have additional responsibilities because of

There are basically three important parts that a business must decide: whether they will/or will not comply with the act, and the costs of compliance. Some smaller public companies have decided to delist themselves as public companies rather than comply with Sarbanes. "I have no problem with these arguments because SOX compliance is costly, but SOX is also an opportunity for public corporation - and the non - profits, private companies, universities, etc., that voluntarily adopt its guidelines - to develop the controls and procedures that were not in place at Enron, WorldCom, Arthur Andersen, et al" (Ohaver 14). One thing that is important for many companies to realize is that the compliance with Sarbanes, may really not be as costly as one expected. Plus, many of the rules for compliance are consistent with proper accounting practices and disclosure that companies should have been doing all along. But, there will be increased costs as process, training and documentation are developed and implemented. Audit costs are the heaviest expenditure of SOX. Many experts believe that since the Sarbanes - Oxley Act has came into existence, audit costs are up 23% and that is only going to be a down payment on more to come (Downey). The additional audit costs can be attributed to the fact that many auditors are double and triple checking their work now, and also looking in

The two regulatory requirements that my financial institution must consider before going public are The Gramm-Leach-Bliley Act, and Sarbanes-Oxley Act (SOX). The Gramm-Leach-Bliley Act is a law that requires financial institutions to explain their information sharing practices to their customers and to protect sensitive data. There are three requirements for the Gramm-Leach-Bliley Act, the first is that insurance companies, banks, and brokerage companies are required to secure stored personal financial information. Next the company must advise you on their policy on sharing vital information. The final requirement is that the company has to give the consumer the option to choose whether they want their personal financial information shared.

The similar circumstance occurred with other companies. As such, the government decided that they must do something about this issue and in 2002 Congress passed the Sarbanes-Oxley Act. Not only this act had an immediate effect on us corporations, but the accounting profession was revolutionized by this new introduction. The act gave more regulatory power to lawyers, analysts, and auditors. WorldCom, who was one of the biggest bankruptcies in history, admitted to overstating profits by billions throughout the years. The

Accountability is a critical factor for all public and private companies. In public companies accountability increases, public confidence in the board of management entrusted with a corporation. However, lack of accountability and transparency leads to loss of public confidence in the management of any entity. To this end, the state provides the legislative framework that ensures accountability and transparency prevails in public entities (McNally, 2013). Thus, the role of government is to ensure public companies are managed in a transparent and accountable manner as a way of attracting more investments and retaining public confidence. Sarbanes-Oxley Act is a law in the United States enacted to ensure public companies adhere to transparent standards of accounting in resource usage. The act

On July 30, 2002, the Sarbanes-Oxley Act of 2002 was signed into law by the acting President George W. Bush. The overall purpose of the Act was “to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes.” (SEC, 2013) This Act mandated multiple amendments to improve corporate responsibility, enhance financial disclosures, and combat corporate and accounting fraudulent practices. One requirement of the Act involves a management’s report on internal controls over financial reporting to be included in the annual financial reports of a company. On July 30, 2014, the Securities and Exchange Commission (SEC) announced that CEO Marc Sherman and former CFO Edward L. Cummings of a computer equipment company named QSGI, Inc. are being charged with misrepresenting the state of its internal controls over financial reporting to external auditors and the investing public. Inadequate internal control within the company can be extremely detrimental because investors and lenders rely heavily on financial reports to make decisions. The incorrect records of QSGI enabled the company to maximize loans from their top creditor. This report will show how QSGI’s lack of internal controls hindered their ability to generate revenue and maintain one of the company’s operation centers.

companies complained that the new rules, aimed at improving corporate accountability would cost them in dollars and time. While many companies agreed that governance rules where needed, some companies reported the increased cost of complying. Many executives argued that it would take time away from management focusing on the business interest and instead focusing on complying with the details of the rules. Working for Sirius Computer Solutions I see every year during our annual audits the effects of complying with government regulations. Independent auditors come in and pick samples of documentation, since the don’t always have directs access to reports they will then ask employees for documentation which some can be lengthy and take time away from employees daily duties. Many companies argued that the audit costs would increase as much as 30% due to tougher audit and accounting standards, including rules that made corporations bring off-balance sheet items onto the

Though a plus for auditors, this required the development of two different sets of auditing standards, one for the public accounting sector and one for the private sector. In a 2010 study of SOX, the Institute of Management Accountants Foundation for Applied Research, (IMA), confirmed the following benefits when complying with SOX legislation: 1.) Companies that are SOX compliant have realized and achieved strategic goals, 2.) SOX compliance has led to effective and efficient analysis of performance, 3.) Companies have achieved comprehensive improvements in performance by standardizing and upgrading processes, 4.) Duplicative processes have been identified and eliminated, increasing efficiency and effectiveness, 5.) Transparency of reported information has increased, 6.) Financial reporting has improved as a result of stronger, effective and efficient internal controls over financial reporting, 7.) Increased improvement in the efficiency of both internal and external audits, thereby decreasing audit costs, and 8.) Automating manual controls increasing time efficiency” (Basile, Handy, & Fret,

The Sarbanes Oxley Act of 2002 enacted many new legislations including the creation of the Public Company Accounting Oversight Board, which inspects audits of public companies, increased regulations on auditor independence, prohibiting certain non-audit activities, increased corporate responsibility of company executives and management for financial reports, timely and accurate disclosure requirements, and management’s responsibility to design and test the effectiveness of internal controls. These legislations are just a few of the key sections of the Sarbanes Oxley Act among many others and have has a great impact on public auditors and the audit process of public companies. Although many of these new requirements and regulations require more detail, time, and money to implement, they help to protect the public interest of investors and restore the public’s trust in auditors and the financial reports of corporations and business that must follow the policies the forth in the Sarbanes Oxley Act.

The objective of the act is to protect the general public and shareholders from fraudulent activities and accounting errors and to improve the veracity of corporate disclosure. All public companies must now comply with the Sarbanes-Oxley Act. This act not only affects a company financially but it also affects the IT department as they will be managing the data and how long it is to be stored for. The SOX act has stated that all records within the business should not be stored for more than five years. If this is not complied with then there is a chance that they may be faced with fines, imprisonment or even both. The benefactors of the SOX act believed that it was fundamental to “restore public faith in published financial statements by assuring that accounting records were accurate and could be relied upon” (Jahman & Dowling, The Impact of Sarbanes-Oxley Act, 2008). There has been a growing impression that these previous scandals could have been prevented if an agency was formed by the government to help monitor and prevent these inconsistencies in accounting. The debate still continues on whether the Act is efficient.

The goal of the accounting and audit professions is to provide statements and information on behalf of a firm that are reliable and relevant to users. In order to accomplish this goal, the accounting and audit professions have continuously evolved in order to meet the needs of said users. In this new age of accounting, we feel the need for accountants and auditors to further modify their methodology and process. With the focus of accounting and auditing staying the same, we in the profession must be sure to strive to produce valuable information to the end users.

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

The Sarbanes-Oxley Act of 2002 (SOX) was enacted into law in 2002 in the wake of corporation financial reporting scandals involving large publicly held companies. SOX instituted new strict financial regulations with the intent of improving accounting practices and protecting investors from corporate misconduct. SOX requires corporate executives to vouch for the accuracy of financial statements, and to institute and monitor effective internal controls over financial reporting. The cost of implementing an effective internal control structure are onerous, and SOX inflicts opportunity costs upon an enterprise as executives have