on the Accounting Profession
On July 30, 2002, the Sarbanes Oxley Act (also known as SOX) was signed into law by President George W. Bush. The Sarbanes Oxley Act of 2002 is a federal law that set new or improved standards for all U.S. public company boards, management and public accounting firms. Covered in the eleven titles are additional corporate board responsibilities, auditing requirements and criminal penalties. This essay reviews the implications of the Sarbanes Oxley Act on the accounting profession.
The Implications of the Sarbanes Oxley Act on the Accounting Profession
President George W. Bush signed the Sarbanes Oxley Act into law on July 30, 2002. This law set new and enhanced standards for public companies and the boards, management and accounting firms. The Sarbanes Oxley Act also brought about considerable changes to the financial reporting and auditing practices of public companies. The act holds top executives for these companies personally responsible for the financial data and its timeliness, with non-compliance having criminal consequences (Trivoli, 2004).
The Sarbanes Oxley Act (also known as SOX) created a new agency, the Public Company Accounting Oversight Board (or PCAOB) to oversee the auditors of public companies. The PCAOB is overseen by the Securities and Exchange Commission (SEC) and consists of five full-time members. The main job of the PCAOB is to “oversee and investigate the audits and auditors of public companies”. Two of the five members must be or must have been CPAs, while the other three members must not be or cannot have been CPAs. Accounting firms who audit public companies are required to register with the PCAOB and pay registration and annual fees (facultyfiles, 2002). In addition to the creation of the PCAOB to oversee the auditors, SOX mandated a set of internal procedures designed to ensure accuracy in disclosure of the...