The Sarbanes Oxley Act Of 2002

However, the application of SOX has brought on regulations that public companies must put in place and follow to prohibit these unethical occurrences. One major advantage for associated with SOX is that more thorough audits are being conducted by auditing firms. Audits being conducted more thoroughly will provide accuracy and an increased reliability of financial data. This will affect taxes in a positive way and provide firms with an advantage. Causholli, Chambers, and Payne (2014) suggest that prior to the implementation of SOX in 2002, “an auditor’s opportunity to sell additional non-audit services in the subsequent year, coupled with the client’s willingness to buy services, intensified the economic bond between auditor and client, in turn reducing auditor independence and the quality of financial reporting” (p.681). The regulation of auditor provided non-audit tax services has increased the reliability of tax and financial reporting within companies. Seetharaman, Sun, and Wang (2011) explain that “in a post-Sarbanes-Oxley environment, the benefits of auditor-provided non-audit tax services (NATS) seem to manifest themselves in higher quality tax-related financial statement management assertions” (p. 677).

In the year 2002, the US reached a land mark decision when the Sarbanes Oxley act was finally affected into law which principally changed the way auditing and financial reporting was being conducted. This act was prompted by high level frauds that public companies engaged in with regard to financial reporting and auditing practices. The act therefore recommended the setting up of a Public accounting Oversight board which was mainly to conduct regulatory and supervisory roles in auditing public audit firms and individual auditors. This was done through establishment of proper quality control measures on the work of auditors to minimize the audit risks that firms could face while conducting their work. The Ligand Pharmaceuticals case

The Sarbanes-Oxley Act consists of 11 titles that set significant requirements and consequences for non-compliance in terms of transparency of financial reporting and accountability of leadership for publicly held companies. The Act established the Public Company Accounting Oversight Board (PCAOB), which is an independent, nongovernmental and non-profit organization created to oversee the audits of public companies. The Act also set requirements for the audit committee, the CEO and CFO in regards to certifying financial statements, prohibits loans to executive officers, require real-time disclosure of information, changed the deadline for insiders to report trading in company 's securities to within two business days of the transaction, provides for the protection of whistleblowers, and imposes sanctions and penalties on violators of the provisions of the Act (“Corporate scandals, the Sarbanes-Oxley Act of 2002 and equity prices,” 2007, p. 83). All of these provisions are used to help improve accuracy and reliability of corporate disclosures by ensuring transparency, neutrality, and accountability in reporting financials, in order to protect investors.

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

After major corporate and accounting scandals like those that affected Tyco, Worldcom and Enron the Federal government passed a law known as the Sarbanes-Oxley Act of 2002 also known as the Public Company Accounting Reform and Investor Protection Act. This law was passed in hopes of thwarting illegal and misleading acts by financial reporters and putting a stop to the decline of public trust in accounting and reporting practices. Two important topics covered in Sarbanes-Oxley are auditor independence and the reporting and assessment of internal controls under section 404.

The goal of the Sarbanes-Oxley Act was to deter and prevent corporations from committing financial fraud, protect shareholders and regain the confidence the public had in financial statements that the released (Ferrell, Hirt, Ferrell, 2009). The act did put additional duties on the corporate accounting departments as well as the auditing firms that monitored these corporations. Prior to the law’s enactment, corporations largely had auditors and financial monitors on staff. The law requires that an external auditing firm review not affected by conflict of interest, audit and monitor the financial records of the corporation. While audits are largely seen in a negative manner, having an annual audit done by an outside firm will allow for

New levels of auditor independence and personal accountability for CEOs and CFOs are provided by the Act. Additional accountability for corporate Boards, as well as increased criminal and civil penalties for securities violations, increased disclosure regarding executive compensation, insider trading and financial statements are also presented under SOX. (The Institute of Internal Auditors: “The Sarbanes-Oxley Act of 2002: Effect on Audit Committees at Organization Not Publicly Traded.” January 2004. Accessed May 31, 2012 from: http://www.itaudit.org/)

The Sarbanes-Oxley Act of 2002 was designed to create oversight and decrease the amount of corruption in the accounting industry. The Article includes a number of provisions dealing with financial reporting, conflicts of interest, corporate ethics and the oversight of the accounting profession, as well as establishing new civil and criminal penalties.

In the early 2000s, corporate financial statement fraud was rampant, as companies such as Enron and WorldCom used shady accounting practices to inflate their revenues and hide losses. This led to the introduction of the Sarbanes-Oxley Act of 2002, the most extensive form of accounting reform legislation ever passed. It had many consequences for publicly traded companies and public accounting firms, some of which were positive, while others were detrimental. One of the detrimental impacts, the cost of compliance, was alleviated at least partially by the introduction of Auditing Standard Five in 2007. This paper will examine the time period leading up to the passage of the act, the different parts of the legislation, the introduction of Auditing Standard Five, and the impact on registrants and auditors.

With regards to internal control and evaluation, the “Sarbanes-Oxley Act of 2002” is the manuscript to address fraud and risking the trustworthiness of the corporation.

In order to prevent the happening of such disaster, the USA congress enact a new regulation named Sarbanes-Oxley Act of 2002 , also called “Public Company Accounting Reform and investor Protection Act” The main purpose of the act is to protect shareholders and general public from accounting errors and fraudulent practices in the enterprise, as well as improve the accuracy of corporate disclosures. (Mike Oxley 2002). Sarbanes-Oxley Act of 2002 is deemed to be one of the most virtual governance reforms and corporate disclosure in the United States history.

This research paper endeavors to expose how the Sarbanes- Oxley Act of 2002 might have led to the accountability of holding corporate executives for their actions in the past and also in the future. The paper will examine and explore the genesis of the Sarbanes-Oxley Act as well as give details on the act’s relationship to the ethics of the institution and the persons who work and manage the institution. The paper also proceeds to discuss different corporations around the globe that have been endorsed with the Sarbanes- Oxley Act and their subsequent benefits and demerits as opined by different individuals. The paper shall prove to be a relevant tool for any administrator managing a public company. Anyone going through this

Audit planning details change from client to client, no matter the complications presented. Each evolution of society’s business world prompts rule makers to update authoritative accounting standards in order to allow for changes, auditors are then responsible to certify their client’s financial reports adhere within compliance according to current authoritative standards. Many cite the Sarbanes-Oxley Act (SOX) of 2002 as being legislation that has had the most profound impact on the auditing profession; incidentally, an auditor’s job is to certify financial statements are a fair representation of a company’s financial position, at a given point in time, using current acceptable standards. Society deems auditors as gatekeepers and expects the auditing profession to find and report fraud, prevent fraud, and make certain financial statements are true, fair representation of a company’s financial position. Even though the rules, regulations, and generally accepted accounting principles can sometimes be difficult to find and translate, the public expects auditors to prevent events such as those that sparked SOX. The Financial Accounting Standards Board (FASB) developed the Accounting Standards Codification (ASC) that became the authoritative source July 2009 (FASB, 2009). Perhaps the hardest impact auditors experience with FASB ASC is attempting to ascertain clients’ FASB ASC references in disclosures on financial statements; “management cannot delegate this function to the

The Sarbanes-Oxley Act was enacted in response to a chain of high profile financial scandals that happened in the early 2000s at companies including Tyco, Enron and WorldCom that shook investor confidence (Rouse, n.d.).

Over the past decade the world has been taken by surprise by the numerous accounting scandals that have occurred, for example, Enron, WorldCom, Tyco, Xerox, and Global Crossing (Suyanto, 2009, p. 118). Since those accounting scandals occurred the United States Congress passed the Sarbanes-Oxley Act of 2002 (SOX) to help improve a company’s corporate governance and help deter fraud (Chinniah, 2015, p.2). In addition to SOX, the Accounting Institute of Certified Public Accountants (AICPA) passed the Statement on Auditing Standards (SAS) No. 99 (p. 118). Both of these new accounting laws help to deter financial statement fraud from occurring.