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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

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