The Ethics Of Sarbanes Oxley Act

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Sarbanes-Oxley Act was enforced in the past but caught everyone’s attention when drastic audit failures from Enron and Worldcom happened. An enhanced act (SOX) was enacted in 2002 improving audit quality. In particular, section 404 provides guidance of assessment to internal control. For an accounting perspective, internal control is a system for internal and external auditors to measure performance and recommend the improvement of the control. It is definitely correct that both enforcement and the system are to address the risks of frauds. In the meantime, a new regulatory agency, the Public Company Accounting Oversight Board (PCAOB) was created to monitor the work of public accountants. Among SOX and the PCAOB, accounting
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With the use of AIS, risk management become higher and material weaknesses can be avoided that management can efficiently make decisions under reliable and accurate financial information. Therefore, there is a direct correlation between AIS and controls along with legislation.
Sarbanes-Oxley Act of 2002 (SOX)
SOX was passed by the Congress after the substantial audit frauds by Enron and Worldcom occurred. A series of standards were set and enforced for all U.S. public corporations and public accounting firms in order to improve business performance and processes, and decision-making. It is mandatory. SOX consists of 11 major elements following as (SOX, 2002, p. 1):
1. Public Company Accounting Oversight Board
2. Auditor Independence
3. Corporate Responsibility
4. Enhanced Financial Disclosures
5. Analyst Conflicts of Interest
6. Commission Resources and Authority
7. Studies and Reports
8. Corporate and Criminal Fraud Accountability
9. White Collar Crime Penalty Enhancement
10. Corporate Tax Returns
11. Corporate Fraud Accountability
Each of them is significant for public accounting companies to develop effective control environment, provide reliable financial information, and set policies complying with applicable laws and regulations.
Internal Controls According to the framework, Internal Control – Integrated Framework, issued by the
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