In the wake of accounting scandals over the past several years, how has the Sarbanes-Oxley Act (SOX) of 2002 affected the practice of accounting? What is the role of internal controls in complying with SOX (2002)?
The Sarbanes-Oxley Act (SOX) of 2002 is an act pass by the Congress of the United States in the year of 2002 with the intention to protect investors in case of a possible fraudulent account act which normally are conducted by the organizations. This act gave a strict reforms to organizations to follow, by doing so it help to prevent accounting fraud and improve disclosure made by some organizations. The act was the result of multiple accounting scandals such as Tyco, WorldCom and Enron in the year of 2000. These scams resulted in the loss of confidence of the investor in the financial statement and demanded the need for regulations. By introducing the Act, there were various compliance, regulatory measures which increased the amount of information that the organization needs to supplied the government authorities, which it also led to the changes in the accounting mechanism of the organizations. The act also requested that the organization needed to provide with more detailed application of accounting standards and differential reporting of segmental analysis, and expenses. All accounting transactions are now require to have a more professional approach and analytical by the accounting department of the organizations. The final report also has been increased, the correct classification of the expenses and the income should always be done after making the deterministic approach rather than the facie approach. The introduction of SOX in 2002, made accounting an ongoing process to carry through the year and it also burdened organizations with a higher fees as compare to Pre-Sox periods. Internal control plays an important role in the compliance of SOX. Multiple areas are covered under SOX reporting at the regular time interval by the organization,...
Please join StudyMode to read the full document