Sarbanes Oxley : Corporate Responsibility For Financial Reports

750 Words3 Pages
Few pieces of legislation have had an impact on corporations, accounting firms, and investors like Sarbanes-Oxley. Sarbanes-Oxley was passed by Congress in 2002 as direct result of the accounting scandals that plagued the public equity markets during the late 1990s and early 2000s. Sarbanes-Oxley was developed to be a series of measures, safeguards, guidelines, and criminal punishments in order to prevent future accounting scandals on the scale of Enron and Worldcom. Sarbanes-Oxley has profoundly impacted both management and accountants albeit in mostly similar ways. The following exploration will compare and contrast these views held by management and accountants regarding Sarbanes-Oxley. According to Green (2004) Sarbanes-Oxley…show more content…
Management views these changes as an additional risk that they were not previously subject to. Section 302 was intentionally designed to prevent management teams from stating that they did not fully approve of the information in their company’s financial statements and annual reports. Section 302 requires management to become more aware of the internal control environment of their company. Prior to Sarbanes-Oxley, internal controls were not a significant corporate edict and were left to the charge of internal accountants, not high level executives. Accountants are not significantly impacted by Section 302. Accounting firms were able to generate significant internal control design consulting fees during the first few years after the enactment of Section 302. Section 401 covers additional Disclosures in Periodic Reports. These additional disclosures include all material off-balance sheet liabilities, obligations, or transactions. Management views Section 401 as a significant hindrance to what used to be a rather common management technique: absorb the benefits of a business transaction onto the issuing company’s financial statements but leaving the liabilities or obligations on the non-issuing and non-consolidated entity. Accountants view Section 401 as a significant contributing factor to the increased liability exposure of poor audits. Accounting firms revised their audit
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