Sox's Impact On Financial Reporting Essay

The most influential and long lasting effect that SOX had on financial reporting was the creation of the PCAOB. One of the biggest issues before 2002 was that laws weren't being enforced. With the creation of this private company it would ensure that all laws and guidelines set in place were effective. The PCAOB is different from other companies because unlike others before it they were allowed to imposed taxes on auditing companies and public companies which allowed them a different budget that was sheltered from the Congressional Budget process. The PCAOB was also allowed to operate without the pressure of the public opinion and against law suits from audit and other companies which helped them significantly. Many feared this idea at first but it allowed them to do their job most
Prior to 2002 companies didn't have much internal control set in place and even if they were it was loosely enforced. This was all to the benefit of the top executives that could easily change figures and report false financial statements for personal gains. It was established that a separations on powers and responsibilities was needed to ensure that one person could not adjust anything by themselves without anyone having to check their work. This meant that now more people would have to verify statements and were held accountable with large monetary penalties and fees or even time in jail in cases of fraud. Now that high officials were being held accountable a new code of ethics was created amongst companies in order to inform all its employees of what is expected of them. Due to these new internal controls being implemented employees dealing with cash or physical assets were for the most part now bonded to ensure that theft wouldn't occur and even if it did other employees would find out because of physical controls like locks and security clearances that logged everyones