The Sarbanes Oxley Act Of 2002

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The Sarbanes Oxley Act of 2002 marked a significant change in the world of business with relation to auditors and public companies. In this paper, I will discuss the causes that led to the creation of the Sarbanes Oxley Act as well as key sections of the act that impact auditors and their effect on public companies and investors. I will also address the impact of the auditing standard no. 5 and how it pertain to auditors and public accounting firms.
Causes of the Sarbanes Oxley Act
In 2000 the panel on audit effectiveness made a variety of suggestions to improve audits including strengthening and unifying the rules and regulations of audits, pre approving non audit services, and assigning more responsibility to top level management for the
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(Anandarajan, Kleinman, & Palmon, 2008)
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.
Prohibited Auditor Activities
Section 201 states that it is unlawful for any public registered accounting firm and its counterparts that are auditing an issuer to provide any other services outside the scope of the audit and the services listed under subsection (h) at the same
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