ipl-logo

Accountants And The Sarbanes-Oxley Act

4039 Words17 Pages

Introduction Accountants play a significant role in the world economy as professionals that prepare the financial documents that describe the health of a publicly traded business. As you and your co-workers are professionals, you get training and must be certified whether through college diploma or being a certified public accountant (CPA). Whether it is the tax forms prepared by tax accountants or CPAs that deal in financial statements, if these documents are inaccurate they may lead to significant instability in companies and financial markets. An important legal issue that can cause inaccuracies in financial forms is accounting malpractice. Accounting malpractice or accounting negligence is also accounting, and accountant liability which …show more content…

The laws that allow the government to do this is the Foreign Corrupt Practices Act of 1977 and the Sarbanes-Oxley Act of 2002, where Foreign Practice Act tries to make accountants for publicly traded firms keep a correct account of transactions and purchases, and having more internal controls to protect the company’s assets. The Sarbanes-Oxley Act adds that the company must describe the internal controls and how they “to assure the integrity of financial reporting.” Sarbanes-Oxley made important the Public Company Accounting Oversight Board by making it the institution that regulates accounting practices in publicly traded companies while American Institute of Certified Public Accountants deals with making standards for private accounting firms. If an accountant in a company does not follow these requirements, then they can bring litigation toward themselves for not following Generally Accepted Accounting Principle (GAAP) or Generally accepted auditing standard (GAAS). These laws present the importance accounting has that it …show more content…

Cooper & Lybrand was a case that went up to the Nebraska Supreme court in 1996, and it involves the bankruptcy of World Radio Laboratory (World Radio) and the ways a plaintiff may successfully sue an accounting firm for malpractice but not for the amount they wanted. The case started with World Radio Laboratory running a successful electronics business until 1989 when World Radio Laboratory filed for bankruptcy. World Radio blamed the accounting firm of Cooper and Lybrand since it was found that an account payable were missing in the financial statement prepared for the year 1982. The Nebraska Supreme Court had a few points of analysis that they were needed to focus on to give their decision. One issue was the statute of limitation which is the first defense for an accountant that is charged with malpractice. As this is a Nebraska case, the statute of limitation was two years, but there was an exception when it relates to the discovery of misconduct that was not possible to find with two years which extends it for 1-year from finding out. World Radio pursuit of seeking damages was upheld for 1982 because the discovery of the account payable error was not identified until 1985, where they filed a suit against Cooper & Lybrand on May 20, 1986, which is allowed because of the exception. They not allowed to file a suit 1983 damages which are within two years of statute of limitation. In this case, the court only questioned the causation and

Show More
Related
578 Words | 3 Pages

Due to this reason many of these companies begin to expose financial fraud. The government believed that the impact of these actions was not going to be corrected by the free market economy. Therefore, the government did the necessary to impose legislation and to establish a consistent ethical standard across the country. The major changes of the act can be summarized in the first title of the act with “the creation of the Public Company Accounting Oversight Board, also known as the PCAOB”

Read More
1423 Words | 6 Pages

One of the first things that needs to be addressed before any policies are put into place are how are violations reported and what happens when violations are reported? Violations can be reported in various methods. A person can call a toll-free number to report the violation. The violation can be reported via email or dropped in an ethics “drop box”. The final way an ethics violation can be reported is directly to immediate supervisor, department head, human resources person or member of the compliance team.

Read More
493 Words | 2 Pages

The rules state that “public companies must keep an internal control report so that any action taken within the business may be monitored and controlled in case any illegal action is taking place.” The corporations must also “have an outside auditor to evaluate their internal control and report them on the audit report.” The act put a new body in place to “watch over the work of auditors of public companies, called the Public Company Accounting Oversight Board, or PCAOB.” Another provision of SOX is that “accounting firms are not allowed to audit public companies or offer certain consulting services for the same client.” With SOX in place, there are penalties for anyone who violates the act’s provisions.

Read More
696 Words | 3 Pages

companies’ did (Balsam, Jiang, Lu, 2014). Additionally, prior to SOX, auditors were only held responsible for financial reporting if their client’s company collapsed (Elder et al. 2009). However, that all changed after the Enron, WorldCom, and Tyco accounting scandals of 2000 and 2001.

Read More
416 Words | 2 Pages

Abstract On July 25, 2002, Congress passed the Sarbanes-Oxley Act of 2002 (SOX) in reaction to a series of financial accounting scandals involving companies like Enron, Tyco and WorldCom. SOX Act is a direct result of the legislature reaction to the above mentioned scandals. This paper presents the objective and main components of the SOX, criticism of SOX. The paper also deals with the economic impact of SOX and whether SOX met its goals.

Read More
1668 Words | 7 Pages

Control Procedures Internal controls are the main way that fraud and unintentional errors are prevented, detected, or corrected in a company (Harrison Jr. et al., p. 197). These controls are implemented by management as well as the board of directors that consists of five main objectives: safeguard assets, encourage employees to follow company policies, promote operational efficiency, ensure accurate, reliable accounting rectors and comply with legal requirements such as the SEC, IRS, etc (Harrison Jr. et al., p. 197). All public companies must develop a system of internal controls and auditors must examine these controls and report on their reliability (Harrison Jr. et al., p. 197-198). Additionally, the Sarbanes-Oxley Act of 2002 (SOX)

Read More
768 Words | 4 Pages

SOX and Small Businesses Since the inception of the Sarbanes-Oxley Act of 2002 (SOX), publicly traded companies have had the burden of meeting the requirements of the act. Small businesses are the backbone of the U.S. and provides the majority of job growth for the country. The requirements of SOX have placed a significant financial burden on all public companies. There are advantages and disadvantages in almost everything, however, for small businesses SOX has affected them the most.

Read More
398 Words | 2 Pages

The SOX act requires that larger organization’s control of financial reporting be subject to external audits by independent auditors, as well as quarterly reviews (Kitching, Pevzner, & Stephens, 2013). The SOX act charges the CEO and the CFO with the ultimate responsibility for accuracy of the organization's financial statements (Edmonds, Tsay, & Olds, 2011). Although the organization’s lower level managers will likely prepare the annual report, the CEO and the CFO are required to review the report and certify to their knowledge that the report does not contain false statements or any omissions (Edmonds, Tsay, & Olds, 2011). SOX requires management of an organization to create a code of ethics and to file all reports using this code (Edmonds, Tsay, & Olds, 2011). Finally, SOX demands that management of an organization establish a hotline for anonymous reporting of fraudulent activities (Edmonds, Tsay, & Olds, 2011).

Read More
458 Words | 2 Pages

Auditing, a dynamic assurance model, has played an essential role in the economic environment in the last few decades. Specifically, it increases the credibility of professional accounting and ensures market integrity. Auditors prove that a company's financial records and accounting procedures comply with the regulation by reviewing financial statements and records. In the early 2000s, there were some major corporate collapses and audit failures, which have threatened the credibility of the audit function such as the collapse of Enrol followed by the fraud in WorldCom and collapse of Arthur Anderson or the collapse of HIH insurance in Australia. Hence, acquiring more knowledge about the recent changes in the audit and financial reporting environment is very important (Leung, Coram, Cooper & Richardson, 2015, pp. 4-43).

Read More
690 Words | 3 Pages

Since the business environment is becoming more complex, global and digital, the role of accountant is changing dramatically. While globalization makes the word smaller it increases the complexity of the accountant’s role, particularly in a multinational organization like Cochlear. Correspondingly, understanding the law in those countries as well as the rules and regulations that business can comply with is required by accountants these days. Accountants also have to set the product price at an appropriate level that both

Read More
836 Words | 4 Pages

This review certifies the correctness and validity of the item being reviewed by the CPA where forensic service includes searches for arches for evidence of criminal conduct or assists in the determination of claimed damages. In a big businesses CPA has a key role because CPA handles all the financial responsibilities for example the CPA manages company’s financial statements in order to assure stockholders and other financial statement users that a company’s financial position is reported fairly. In recent years has CPA’s has changed little bit CPA also works in company’s environment accounting, in an environment accounting CPA gets involved in environmental planning and audits to handling claims and disputes. CPA works in many ways for the Government. At the federal level, some examples of where a CPA would work include the Federal Bureau of Investigation, the Internal Revenue Service, Department of the Treasury, and the General Accounting Office.

Read More
734 Words | 3 Pages

What is accountability and why is it important to governmental accounting? Accountability is often considered the most vital motivation behind correctly preparing the necessary governmental financial reports. The Governmental Accounting Standards Board (GASB) states, “Governmental accountability is based on the belief that the citizenry has a ‘right to know,’ a right to receive openly declared facts that may lead to public debate by the citizens and their elected representatives. Financial reporting plays a major role in fulfilling government’s duty to be publicly accountable in a democratic society” (Halsey, Hopkins 2014). In this paper, I will be discussing why accountability is the most crucial point in governmental accounting and what accountability actually entails.

Read More
487 Words | 2 Pages

In today business world, it is about making a profit. Some companies have managerial staff whose focus is primarily on profit building. A profit is produce when there is an excess in income over operational and expenditures cost. In an essence, the ability to produce goods or services at a lower cost to maximize income output for a company. As businesses incur revenue, there are challenges and social responsibilities that come along with it.

Read More
709 Words | 3 Pages

After a few major oversights in accounting, the government felt that the profession was no longer capable of handling this on its own and that newer actions were needed. The board is controlled by the SEC, and is responsible for the setting the standards and overseeing the auditors of public companies. Its other roles include enforcing the registration and inspections of public accounting firms, quality control, establishing independence standards and rules, as well as investigating and disciplining firms involved in questionable practices. With the passing of Sarbanes-Oxley in 2002, the PCAOB became the major public accounting governing

Read More
616 Words | 3 Pages

BLOG Facts that no one tells you about accounting services Some of us hate the concept of hiring accounting services and some of us are scared or feel hesitation in hiring their services. However, with the passage of time the clouds of ignorance are clearing and people are waking up to the benefits of accounting services for their personal and business needs. In these circumstances, there are still many people who hardly have any idea about the services of an accounting firm and their advantages in the contemporary times. Thus the following facts aim to bring some interesting aspects about accounting or tax services that nobody would tell you in the current times.

Read More

More about Accountants And The Sarbanes-Oxley Act

Open Document