Sarbanes Oxley Act
Essay Preview: Sarbanes Oxley Act
Report this essay
Sarbanes-Oxley Act
The Sarbanes-Oxley Act of 2002 is considered to be the most important change to federal securities laws in the United States since the New Deal. It came in the wake of a series of corporate financial scandals, including those affecting Enron, Arthur Andersen, and WorldCom. Among the major provisions of the act are: criminal and civil penalties for securities violations, auditor independence, certification of internal audit work by external auditors, and increased disclosure regarding executive compensation, insider trading and financial statements.

While unquestionably useful to the investing public, thousands of companies now face the daunting task of ensuring their operations are Sarbanes-Oxley compliant. Auditing departments typically turn to a two pronged solution to achieve this goal. First, firms initiate a comprehensive external audit of the company by Sarbanes-Oxley compliance consultants to identify areas of risk. Second, firms initiate a company-wide installation of automated software systems that provide the security and electronic paper trails necessary to guarantee compliance on a long term operational basis.

Perhaps the most controversial aspects of Sarbanes-Oxley Act are the change from industry self-promulgation and self-enforcement of standards relating to auditing, accounting, quality control, ethics, and independence, to, in effect, government regulation and promulgation of standards through the Public Company Accounting Oversight Board, and the limitations on the nonaudit services a company can provide to its audit clients. Although the Public Company Accounting Oversight Board is not directly empowered to establish accounting standards, Sarbanes-Oxley Act section 108 allows the SEC to recognize “generally accepted” accounting standards set by private entities.

Sarbanes-Oxley Act established the Public Company Accounting Oversight Board, under Securities and Exchange Commission oversight, to be responsible for establishing or adopting standards for quality control, ethics, independence, and anything relating to the preparation of audited financial statements. The Public Company Accounting Oversight Board also conducts investigations and disciplinary proceedings, and imposes sanctions on individuals or audit firms. Under Sarbanes-Oxley Act, an auditor is prohibited

Get Your Essay

Cite this page

Sarbanes-Oxley Act And Public Company Accounting Oversight Board. (June 8, 2021). Retrieved from https://www.freeessays.education/sarbanes-oxley-act-and-public-company-accounting-oversight-board-essay/