Unit 1: Introduction to Financial Reporting
GM506: Strategic Financial Analysis
Crystal Gifford Phd.
October 27, 2012
Chapter 1: Case 1-10
1. The Sarbanes-Oxley Act refers to “the Commission” in several sections. To what Commission is the Sarbanes-Oxley Act referring?
The commission that the Sarbanes-Oxley Act refers to is the Securities and Exchange Commission (Gibson, 2013).
2. Describe the responsibility of the Commission in relation to the “Board.”
The Commission is responsible for appointing the five members of the Board. It approves the actions of the Board. And it is responsible for over- sight and enforcement authority over the Board (Gibson, 2013).
3. Describe the Board.
The board was established to oversee the audit of public companies to protect the interests of investors and the public interest in the preparation of informative, accurate, and independent audit reports for companies. The Board shall be a body corporate, operate as a nonprofit corporation, and have succession until dissolved by an Act of Congress (Gibson, 2013).
4. Describe the duties of the Board.
The duties of the board are:
• Register public accounting firms that prepare audit reports for issuers • Establish and/or adopt auditing, quality control, ethics, independence, and other standards relating to the preparation of audit reports for issuers. • Conduct inspections of registered public accounting firms. • Conduct investigations and disciplinary proceedings, and impose appropriate sanctions. • Perform such other duties or functions as the Board determines are necessary or appropriate to promote high professional standards among, and improve the quality of audit services offered by, registered public accounting firms and associated persons thereof. • Enforce compliance with this Act.
• Set the budget and manage the operations of the Board and the staff of the Board. (Gibson, 2013)
5. Who must register with the Board?
It is a mandatory registration for every public accounting firm (Gibson, 2013).
6. Describe the Board’s responsibility as to the inspection of those registered with the Board.
The Board has the responsibility of inspections to assess the degree of compliance of each registered public accounting firm and associated persons of that firm with the Act, the rules of the Board, the rules of the Commission, or professional standards, in connection with its performance of audits, issuance of audit reports, and related matters involving issuers (Gibson, 2013).
7. Describe the responsibilities of the Board in relation to auditing standards.
The board establishes standards for auditing and quality control, and may amend or change those standards like the ethics standards as required by the commission or as appropriate in the public interest or for the protection of investors (Gibson, 2013).
8. Contrast the applicability of the Sarbanes-Oxley Act to domestic public accounting firms versus foreign public accounting firms.
Any foreign public accounting firm that prepares or furnishes an audit report shall be subject to the Act in the same manner as a public accounting firm (Gibson, 2013).
9. Describe the recognition of accounting standards by the Commission as provided.
The commission may recognize any accounting standard body that is organized as a private entity, that has a board of trustees, that is funded as in section 109 of the Sarbanes-Oxley Act of 2002, and that has adopted procedures to ensure prompt consideration and changes to accounting principles necessary to reflect emerging accounting issues and changing business practices (Gibson, 2013).
10. Comment on the funding for the:
2. Financial Accounting Standards Board.
The board is funded and maintained by the Annual Accounting Support Fee. or by...