...theorld of financial accounting Sarbanes and Oxley or SOX is one of the most important pieces of legislation passed in this decade or even in the history of financial accounting. Sarbanes and Oxley brought about major changes in financial accounting which allows for more regulation of the accounting profession. It took Accounting form being looked at as a numbers game and placed more importance on the communication aspect of the profession. This essay will focus on Sarbanes and Oxley and its impact on the accounting profession as a whole. How can one piece of legislation weigh so heavily on a profession? To answer that question one has to look at the impact Sarbanes and Oxley has had on the practice of public accounting. Prior to Sarbanes and Oxley the regulation of public accounting was done internally, through organizations such as the SEC. However with the passage of Sarbanes and Oxley the profession was given an overhaul making companies more accountable. Sarbanes-Oxley was established to improve the quality and transparency of the financial statements issued by public companies. With that purpose in mind Sarbanes-Oxley developed a new board to oversee how financial statements are audited according to independent standards, the Public Company Accounting Oversight Board. This changed the game. It decreased the chance of companies falsifying financial statements, mainly because of the threat of penalties and imprisonment. In addition Sarbanes and Oxley have had a cascade effect on...
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...Unethical Practices and Behavior in Accounting Name Institution Course Tutor Date Unethical Practices and Behavior in Accounting The Sarbanes-Oxley (SOX) Act of 2002 was passed by the congress to protect investors from fraudulent accounting activities by organizations (Hart, 2009). Investors depend on the information that they receive from accountants to make investment decisions and hence if incorrect information is provided, the investors make inaccurate decisions, which could be costly. Section 302 of the SOX Act makes it mandatory for the accuracy of reported financial statements to be certified by senior management. In addition, section 404 of the Act influences the quality of the financial statements by specifying that the management should establish internal controls (Hart, 2009). However, in spite of the emphasis of the SOX Act, accountants continue to practice unethical behavior in accounting. In his article, “What Are the Causes of Ethical Lapses in Accounting?†Jagg Xaxx outlines four situations that might lead to unethical practices and behavior in accounting. Xaxx has been a writer since 1983, focusing mostly on environmental issues, Buddhist iconography, and surrealism. For more than 12 years, Xaxx worked as a cabinetmaker and in house building and renovations. Xaxx holds a PhD in art history and has in depth knowledge in different fields. In this article, Xaxx identifies four reasons why accountants engage in unethical behavior. The...
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...be with improvement of Internal Control and the application of its principles. Proper Development of Internal Control What is Internal Control? Internal control makes up all methods that are adopted within an organization to safeguard assets, enhance the reliability of accounting records, increase operational efficiency, and ensure compliance with laws and regulations. [Kimmel (). Financial Accounting [6] (VitalSource Bookshelf), Retrieved from http://online.vitalsource.com/books/9781118233634/id/P7-62] As a part of my evaluation of LJB, there are key new regulations that have to be followed and implemented in concordance with the plans to go public. As a public company that will issue stock, LJB will have to comply with the Sarbanes-Oxley Act, (SOX), this is an enhancement of corporate responsibility relative to financial reporting issues. Specifically,...
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...Sarbanes-Oxley Act (SOX) of 2002 LAW/412 July 25, 2014 Instructor Jacques Ward Congress Should Repeal the Sarbanes-Oxley Act Most commentators agree that the SOX Act provided the most sweeping and comprehensive amendments to the ’33 and ’34 Acts in securities law history. (Melvin, 2011 pg. 423) On the other hand, William A. Niskanen believed different. Individuals found it difficult to swallow the Act because it was believe to only be enacted so government official could feel better about confronting only a few points of popular concern instead of resolving the matter. According to Niskanen the SOX act of 2002 is unnecessary, harmful, and inadequate (Niskanen, 2006). Lengthy terms of incarceration and seizure of personal property are penalties under the SOX Act. The act was viewed as unnecessary because the stock exchange had already put into action a policy to address most of the problems given in the SOX Act. Those policies include accounting standards, prosecution for fraud, audits, and financial reporting procedures. Officials believed that both acts handled the same issues. Therefore; congress should deem the SOX act of 2002 unnecessary. The SOX act of 2002 was regarded as damaging because it would “reduce the incentive of corporate executives and directors to seek legal advice” (Niskanen, 2006). It was also seen as prejudicial because it created prohibitions on loans to corporate officers that would create complications for reparation. The act was considered to...
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...Sarbanes-Oxley Act (SOX) of 2002 Topics Covered: How SOX affects the following: CEO’s and CFO’s of Public Companies Outside Independent Audit Firms SOX section 404 on Internal Control The Main Advantages and Disadvantages of SOX Executive Summary The Sarbanes-Oxley Act of 2002 (SOX) was intended to create more transparency in financial reporting and to combat the perceived inflation of CEO compensation. To do this, the act required that a board of directors be financially independent from the CEO and have no familial ties. It also required the CEO and CFO to personally sign all quarterly and annual reports submitted to the SEC and provided for criminal penalties if this was not done. Our research indicates that Sarbanes-Oxley has created more transparency in the system, but it has actually had the opposite effect than was intended with regards to CEO compensation. The research indicates that CEO compensation has increased for many companies post-Sarbanes-Oxley. Due in large part to the Enron scandal, SOX needed to address outside independent audit firms to improve the accuracy of financial reports disclosed by publicly traded companies. These financial reports are used by investors, bankers and interested consumers to determine how well an organization is doing and provide investors with vital information about a company’s performance. This paper will discuss the Sarbanes-Oxley Act and how the SOX law affects outside independent audit firms. Next we review...
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...aftermath of the Enron and WorldCom, Congress enacted the Sarbanes-Oxley Act of 2002. The Act is considered by many to be the most important legislation affecting the auditing profession since the 1933 and 1934 Securities Acts (Arens, 2010). The Act also established the Public Company Accounting Oversight Board (PCAOB). The PCAOB provides oversight for auditors of public companies, establishes auditing and quality control standards for public company audits, and performs inspections of the quality controls at audit firms performing those audits (Arens, 2010). But the question is, are these regulations effective against corporate fraud and protecting investors? It is my opinion that the most important sections of the Sarbanes-Oxley Act are sections 302, 404, and 802. Section 302 holds a company’s CEO and CFO accountable for their financial reports. They must sign off on the financial reports stating that they have reviewed the report and that the report does not contain any untrue information or omissions. I firmly believe that this section is effective, CEOs and CFOs can no longer “turn a blind eye” or use the excuse that they didn’t know what was going on in their company. Section 404 pertains to the assessment of a company’s internal controls. The auditing firm of a public company must attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting (Sarbanes-Oxley Act 2002). Section 404 also requires management to...
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...Auditing Principles and Procedures ACC2366 Section311 SOX Discussion Question: Section 302 of the Sarbanes-Oxley Act states that senior management must certify the accuracy of the financial statements produced by that accounting firm. How will this section of the act affect senior management’s cautiousness before signing off on the financial statements? Do you think this mandate will encourage more ethical people in senior management roles? Why? Which major corporation that we’ve studied recently had issues with management signing off on their financial statements? Why did they refuse to sign off on them? Under section 302 of the Sarbanes-Oxley Act signing officers are responsible for various duties to ensure the final statements are fairly represented and not misleading to its users. Before management signs off on financial statements they have to be reviewed. They also have to ensure internal controls in place have been evaluated and effective within 90 days prior to the report being issued. According to the Sarbanes-Oxley Act, “the signing officers have designed such internal controls to ensure that material information relating to the issuer and its consolidated subsidiaries is made known to such officers by others within those entities, particularly during the period in which the periodic reports are being prepared” (Sarbanes Oxley Act, 2012, s302). The act requires management to disclose these controls in their financial statements. Officers must also disclose...
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...Sarbanes-Oxley Law Stephanie Mosley ACC 340 University of Phoenix Richard Calabria 07/23/2012 To enhance the dependability and accountability in an effort to safeguard shareholders, the federal government for the United States of America established the Sarbanes-Oxley Act on July 30, 2002. The Public Company Accounting Reform and Protection Act of 2002 is also used to refer to this law. Numerous acts of corruption in the business sector continued throughout the late 1990s as well as early part of 2000 with no laws to prevent it. In response to the very public case of WorldCom and Enron fiscal scams, the Sarbanes-Oxley Act of 2002 (commonly called SOX) was passed to protect the public and investors from unfair practices and accounting mistakes (Rouse, 2007). In order to safeguard shareholders, the president at that time President George Bush pushed for the act to get passed by the Senate and House of Representatives. The law was immediately signed by the president after the law passed the Senate 99-0 and the House of Representative 423-3 (Bumgardner, 2003). Since the law passed, it has been viewed as the best measure since the Security and Exchange Law of 1934 to improve business accounting rules. This law deters businesses from deceiving their shareholders and stockholders and from deliberately committing fiscal scams. Companies must respond accordingly and administer corporate governing plans to prevent bogus activities. The Securities and Exchange Commission administers...
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...Welcome to WritePoint, the automated review system that recognizes errors most commonly made by university students in academic essays. The system embeds comments into your paper and suggests possible changes in grammar and style. Please evaluate each comment carefully to ensure that the suggested change is appropriate for your paper, but remember that your instructor's preferences for style and format prevail. You will also need to review your own citations and references since WritePoint capability in this area is limited. Please see the other helpful writing resources in the Tutorials and Guides section of the Center for Writing Excellence. Thank you for using WritePoint. Running head: Corporate Compliance Plan for Riordian Corporate Compliance Plan for Riordian Robert Trujillo University of Phoenix Corporate Compliance Plan for Riordian Riordian Manufacturing Inc. makes plastic products through the process of plastic injection molding. The main industries that use Riordian products are automotive parts manufactures, aircraft manufactures, aero space manufactures, beverage manufactures, and home appliance manufactures. The company’s annual revenues are $46 million. The company employs 550 people throughout three plants located in Georgia, Michigan, and China. Research and development is done at the corporate headquarters in San Jose, California. In 2000, Riordian Manufacturing Board of Directors decided to expand its...
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...History Initially, accounting information systems were predominantly developed “in-house” as legacy systems. Such solutions were difficult to develop and expensive to maintain. Today, accounting information systems are more commonly sold as prebuilt software packages from vendors such as Microsoft, Sage Group, SAP and Oracle where it is configured and customized to match the organization’s business processes. As the need for connectivity and consolidation between other business systems increased, accounting information systems were merged with larger, more centralized systems known as enterprise resource planning (ERP). Before, with separate applications to manage different business functions, organizations had to develop complex interfaces for the systems to communicate with each other. In ERP, a system such as accounting information system is built as a module integrated into a suite of applications that can include manufacturing, supply chain, human resources. These modules are integrated together and are able to access the same data and execute complex business processes. With the ubiquity of ERP for businesses, the term “accounting information system” has become much less about pure accounting (financial or managerial) and more about tracking processes across all domains of business. [edit]Software architecture of a modern AIS A modern AIS typically follows a multitier architecture separating the presentation to the user, application processing and data management...
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...Sarbanes Oxley Act of 2002 Daniel Alvalle BUS 670 Legal Environment Instructor: Peter McCann 7/29/2013 If you were an investor would you want your money protected? Would you be skeptical about investing in companies since the securities fraud scandals that have happened recently? The answer is most likely, “yes”, to a certain degree. With the news about unethical business practices and companies not following regulatory guidelines, it is difficult to ignore the risk that is involved with trusting someone else with your investment. But there is an answer to help protect companies and shareholder, and it comes in the form of a regulatory organization that was put in place in 2002. That was put in place as a direct response to the corporate scandals of Enron and other scandals that followed, and was also put in place to help restore confidence in the financial market. SOX-Applies only to US companies on the US exchange, and is an Act put in place in 2002 to mandate all publicly traded corporations to maintain adequate internal control. SOX basically make sure that all US publicly traded corporation do what is in the best interest to protect the investment of stockholders. SOX-Sarbanes-Oxley Act of 2002 is an ACT that was put in place where all publicly traded U.S. corporations are required to follow certain guidelines and requirements. Basically, these systems were put in place because of securities fraud issues that came to light in the early 2000’s, and are...
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...structure and organizational design. Internal controls consists of all the measures taken by the organization for the purpose of; (1) protecting its resources against waste, fraud, and inefficiency; (2) ensuring accuracy and reliability in accounting and operating data; (3) securing compliance with the policies of the organization; and (4) evaluating the level of performance in all organizational units of the organization (internal controls are simply good business practices (Internal Audits, n.d.). There are five components of internal controls. Control environment, risk assessment, control activities, information and communication, and monitoring are the five components of internal controls. The control environment is connected to the outline of the company. The control environment involves the integrity, ethical values, the company’s philosophy, and the competence of the entity’s people (US Regents, 2011). The control environment provides the structure for a company’s policies and values for their day to day activities. Control environment factors include integrity and ethical values, the commitment to competence, leadership philosophy and operating style, the way management assigns authority and responsibility, and organizes and develops its people, and policies and procedures (US Regents, 2011). Risk assessment is a step in a risk management procedure. Companies use risk assessment as a guide to determine how risks should be managed within the company. Management use risk...
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...LJB Company Going Public To: The President of LJB Table of Contents * Introduction * Sarbanes-Oxley requirements with publicly traded companies * Effective procedures currently being used * Conflicts and recommendations * Conclusion * Bibliography To: President of LJB Company After reviewing the information provided on LJB Company I have concluded that there are internal controls that must be in place according to Sarbanes-Oxley before taking the company public. The company is on track with some of the procedures that were listed; however, there are also many procedures that need to be put into place to eliminate conflicts. LJB Company has much to work on with internal control before becoming a successful public company. After so many scandals came to light in the early 2000s many new regulations were created to help protect investors. The Sarbanes-Oxley Act of 2002 was created to prevent and detect fraud within public companies. SOX requires that public companies maintain an adequate system of internal controls in the company. “Internal control consists of all the related methods and measures adopted within an organization to safeguard its assets, enhance the reliability of its accounting records, increase efficiency of operations, and ensure compliance with laws and regulations.” (Kimmel 337) LJB Company would need to set in place internal controls that would be acceptable per SOX prior to taking the company public. LJB Company is taking a few...
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...Unethical Practices and Behavior in Accounting Name Institution Course Tutor Date Unethical Practices and Behavior in Accounting The Sarbanes-Oxley (SOX) Act of 2002 was passed by the congress to protect investors from fraudulent accounting activities by organizations (Hart, 2009). Investors depend on the information that they receive from accountants to make investment decisions and hence if incorrect information is provided, the investors make inaccurate decisions, which could be costly. Section 302 of the SOX Act makes it mandatory for the accuracy of reported financial statements to be certified by senior management. In addition, section 404 of the Act influences the quality of the financial statements by specifying that the management should establish internal controls (Hart, 2009). However, in spite of the emphasis of the SOX Act, accountants continue to practice unethical behavior in accounting. In his article, “What Are the Causes of Ethical Lapses in Accounting?” Jagg Xaxx outlines four situations that might lead to unethical practices and behavior in accounting. Xaxx has been a writer since 1983, focusing mostly on environmental issues, Buddhist iconography, and surrealism. For more than 12 years, Xaxx worked as a cabinetmaker and in house building and renovations. Xaxx holds a PhD in art history and has in depth knowledge in different fields. In this article, Xaxx identifies four reasons why accountants engage in unethical behavior. The first...
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...Recommendations 6 Conclusion 9 References 10 Introduction Mr. President as you have indicated you want to be informed about any new regulations required of your company in case you go public. This document will give you an overview of the Sarbanes-Oxley Act, of 2002 (SOX) that your company will be required to implement if you go public. I'll give detailed recommendations and instructions how to implement internal control principles in your organization. There are some additional factors that will be mentioned below in greater detail including compliance, and business ethics in regards to Corporate Social Responsibility. Also you will find out that the report includes a general overview of internal control strategies LJB Company should give consideration to; in order to limit legal responsibility in ethical/legal matters that include; matters of fraud mitigation, document retention, control activities, information/communication factors, monitoring, and assessing risk (Kimmel, 2013, p. 338). I also will advise you in what your company is doing right and instruct you in what your organization needs to improve. Internal Control Requirement As you might know all public companies must comply with the Sarbanes-Oxley Act, which is designed to enhance corporate responsibility as it relates to the financial reporting issues. SOX introduced major changes to the regulations that govern publicly traded companies. You will be required to maintain an adequate system...
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