The Accounting And Auditing Industry

916 WordsApr 25, 20164 Pages
Before SOX was established, the public trusted and depend the auditors wholly for the publicly-traded companies to accurately complete audits of the companies’ financial statements which they relied upon in making investment decisions. The accounting and auditing industry was self-regulated (Cunningham & Harris, 2006). Company managers had little accountability when accounting and auditing problems arose. Everything was changed after there were many high-profile cases of accounting fraud, particularly the scandals of Enron and WorldCom in the early 2000s. Each of these frauds caused massive losses to investors of the companies and the public lost confidence in securities of US market. Following these series of failures, SOX was enacted to restore investor’s confidence which was rattled and to prevent accounting frauds in the future with improved corporate governance and accountability which all public companies must comply. SOX was named after Senator Paul Sarbanes and Representative Michael G. Oxley, who were the main drafters of the Act. It was approved by the House of Representatives and signed into law by the President George W. Bush on July 30, 2003. Lack of ethics and integrity seem to be the key factors that caused accounting fraud. SOX revised the framework for the public accounting and auditing profession, provides guidance for better corporate governance and create regulations to define how public companies are to comply with the law. Although many have questioned
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