Analysis Of The Sarbanes-Oxley Act Of 2002
Accounting Quality
By Helen Tewolde
ACC 573
Financial Reporting and Analysis
Benson Kariuki-Mwangi
August 17, 2014
The Sarbanes-Oxley Act of 2002 (SOX), which he characterized as the most far reaching reforms of American business practices since the time of Franklin Delano Roosevelt. The Act mandated a number of reforms to enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud, and created the Public Company Accounting Oversight Board, also known as the PCAOB, to oversee the activities of the auditing profession (SEC, 2002). Sarbanes-Oxley mandates that the corporate officers and senior executives take personal responsibility for the validity of their company 's financial …show more content…
This involves developing and implementing strategies for the issue of accounting and auditing & assurance standards in order to provide a framework for a company’s overall direction in the setting of standards. It includes developing and implementing a strategy for tiers of financial reporting in accordance with the requirement of the Act. A good reporting strategy would be to determine the difference between market value to book value of equity can be explained by the former strategy being based on future expectations held by investors while the latter is formulated on historical data which has already impacted by the company. Finance theory explains a firm’s market value of equity is the result of investors perceiving three variables: managerial actions, economic environment, and political climate affecting a company’s overall risk and future cash flows. While book value of equity is formulated by identifying residual interest left to stockholders after deducting liabilities which is largely attributed to the past (Wahlen, Baginski,, & Bradshaw, …show more content…
Letting it all out is the best way to assure investors and shareholders that the company has nothing to hide and their information is considered reliable. When less information is revealed it means less certainty. When financial statements are not transparent, investors can never be sure about a company 's real fundamentals and true risk. It 's difficult, if not impossible, to evaluate a company 's investment performance if its investments are funnelled through holding companies, hiding from view. Lack of transparency may also obscure the company 's debt level. If a company hides its debt, investors can 't estimate their exposure to bankruptcy risk. Also the lack of transparency can mean nasty surprises to come (McClure,
By Helen Tewolde
ACC 573
Financial Reporting and Analysis
Benson Kariuki-Mwangi
August 17, 2014
The Sarbanes-Oxley Act of 2002 (SOX), which he characterized as the most far reaching reforms of American business practices since the time of Franklin Delano Roosevelt. The Act mandated a number of reforms to enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud, and created the Public Company Accounting Oversight Board, also known as the PCAOB, to oversee the activities of the auditing profession (SEC, 2002). Sarbanes-Oxley mandates that the corporate officers and senior executives take personal responsibility for the validity of their company 's financial …show more content…
This involves developing and implementing strategies for the issue of accounting and auditing & assurance standards in order to provide a framework for a company’s overall direction in the setting of standards. It includes developing and implementing a strategy for tiers of financial reporting in accordance with the requirement of the Act. A good reporting strategy would be to determine the difference between market value to book value of equity can be explained by the former strategy being based on future expectations held by investors while the latter is formulated on historical data which has already impacted by the company. Finance theory explains a firm’s market value of equity is the result of investors perceiving three variables: managerial actions, economic environment, and political climate affecting a company’s overall risk and future cash flows. While book value of equity is formulated by identifying residual interest left to stockholders after deducting liabilities which is largely attributed to the past (Wahlen, Baginski,, & Bradshaw, …show more content…
Letting it all out is the best way to assure investors and shareholders that the company has nothing to hide and their information is considered reliable. When less information is revealed it means less certainty. When financial statements are not transparent, investors can never be sure about a company 's real fundamentals and true risk. It 's difficult, if not impossible, to evaluate a company 's investment performance if its investments are funnelled through holding companies, hiding from view. Lack of transparency may also obscure the company 's debt level. If a company hides its debt, investors can 't estimate their exposure to bankruptcy risk. Also the lack of transparency can mean nasty surprises to come (McClure,