Effect of Unethical Behavior Article Analysis
The Sarbanes-Oxley Act, passed in congress in 2002 is designed to protect investors from the potential of fraudulent corporate accounting activities. This act strictly mandates reform, aimed directly to prevent fraud and improve corporate financial disclosures (INVESTOPEDIA, 2012).
As a result of several confidence shaking investor accounting scandals that occurred during the late 90s which involved high profile corporations such as Enron, WorldCom and Tyco, a much required overhaul regarding financial statements and regulatory standards laid the foundation for the Sarbanes-Oxley Act. This act is making the accounting world more accessible to others for auditors to come in and help in checking the books. It will hold the executives and directors accountable for the internal controls of the company especially with the threat of imprisonment if the internal controls are not maintained.
The act ensures that a “checks and balance” internal auditing of the accounting cycle for the company and investors to keep their assets in check. The role of internal audits is to ensure that Institute of Internal Auditor’s Standards for the Professional Practice of Internal Auditing Standard 300 Scope of Work be followed. The scope of the internal audit should encompass the examination and evaluation of the adequacy and effectiveness of the organization's system of internal control and the quality of performance in carrying out assigned responsibilities (M. Wood Company, 2012). The internal audit standards are to review the dependability and integrity of financial and operating information and the resource being used to identify measure and classify those reports. The standard requires the system be reviewed to ensure compliance with those policies, plans, procedure, laws and regulations which may have a huge impact on operations and reporting. The standard is used to...