Background[ edit ] InSarbanes—Oxley was named after bill sponsors U. Oxley R - OH.
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Get Access Effects of Sarbanes — Oxley Act Essay Sample With the enactment of Sarbanes — Oxley Act incorporations including foreign corporations and the external auditors have mostly been affected and burdened with newly found responsibilities under the act.
Companies are now responsible for a number of reporting and certification responsibilities; whereas auditors have to assume additional responsibilities of evaluation of internal control systems among others responsibilities and form an opinion keeping their independence intact. In this write up it has been tried to bring forth the real effects of Sarbanes- Oxley act on these mostly affected parties, namely companies, external auditors and foreign corporations.
Further there are certain specific provisions that are applicable only to listed companies. The major issues that are controlled under the act and affect the companies directly are discussed and detailed as under: The important thing is that one of the members of audit committee must be a financial expert.
Financial expert has been stated to be one who possesses who has an understanding of GAAP, internal control, and financial statements.
Financial expert must have experience in preparing, analyzing, and evaluation of financial statements. The objective is that members of audit committee must be technically capable to control and analyze the activities of auditors.
Also, members of audit committee must be independent of management of the company. That means no one from the management of the company can serve as member of the audit committee. The auditors are not allowed to provide services other than audit to the company unless those are approved by the audit committee.
Services other than audit provided by the auditors to the company with approval of audit committee have to be disclosed while reporting to SEC.
The most important and controversial aspect of compliances under SOX is the certification by the Chief Executive Officer CEO and Chief Financial Officer CFO that financial statements of the corporation comply with the requirements of the SEC Act and further that all material information in financial statements clearly and fairly state the financial condition and the financial results of the entity.
The identification of the framework used to evaluate the internal controls. A statement as to whether the internal control system is effective as of year end. The disclosure of any weaknesses in the internal control system.
They must state that not only they read the financial statements but also reviewed the statements that are not misleading. Further, companies must also disclose all rapid and current basis material changes in their financial conditions and financial operations.
The idea is to establish high auditing standards in the country. All accounting firms that provide external audit to publicly traded companies have to get registered with PCAOB. PCAOB seeks from such accounting firms an information about their audit clients, audit fee being charged by such accounting firms, and the types of services being rendered to such audit clients.
PCAOB issues various standards for such accounting firms to follow.The Sarbanes-Oxley Act of is a primary example of legislation following financial market failure.
Sarbanes-Oxley influenced public businesses through transformation of the financial system. I - What are Internal Controls and Their two primary Goals and how did the Sarbanes-Oxley Act of affect Internal Controls.
There are two types of internal controls, i.e.
Preventative, and detective controls, the purpose of preventative Controls is to discourage errors or irregularities from occurring, while the purpose of detective Controls is to find errors or irregularities after they have occurred.
One direct effect of the Sarbanes-Oxley Act on corporate governance is the strengthening of public companies' audit committees. The audit committee receives wide leverage in overseeing the top.
The Sarbanes-Oxley Act is a federal law that enacted a comprehensive reform of business financial practices. The Sarbanes-Oxley Act aims at publicly held corporations, their internal financial controls, and their financial reporting audit procedures as performed by external auditing firms.
Section is a mere two paragraphs on page 45 of the Sarbanes-Oxley Act; and yet it’s causing most of the brouhaha in business boardrooms across the U.S.
and, in some cases, around the world. It comprises three central issues. Section of the Sarbanes–Oxley Act, also known as the whistleblower-protection provision, prohibits any "officer, employee, contractor, subcontractor, or agent" of a publicly traded company from retaliating against "an employee" for disclosing reasonably perceived potential or actual violations of the six enumerated categories of protected conduct in Section (securities fraud, shareholder fraud, bank .