Effects of Sarbanes-Oxley Act on Accountants Profession

Topics: Internal control, Enron, Auditing Pages: 12 (4206 words) Published: June 18, 2013
Table of contents:
1. Introduction ---------------------------------------------------------------------------------- -2- 2. The first effect: accountants responsibility increase
* Special sections of SOX that increase accountants responsibility by imposing criminal liability------------------------------------------------------------------------------------------ -3- * Accountants independence resulting in a higher responsibility of accountants------- -4- * Fraud decrease as a consequence of increased transparency of financial reporting -- -5- 3. The second effect of Sarbanes-Oxley Act: the education sphere of accounting * New informational sources ------------------------------------------------------------------- -7- * SOX coverage at Business/Economics colleges of the USA----------------------------- -8- * How business schools need to prepare future accountants ------------------------------- -9- 4. Conclusion----------------------------------------------------------------------------------------11- 5. Notes--------------------------------------------------------------------------------------------- -12-

Introduction
The profession of an accountant plays an important role in the world business. High-quality performance by professional accountants benefits the economy and society by contributing to the efficient allocation and management of resources in both the private and public sectors and to the operation of financial and capital markets. [1]Transparency of financial reporting is the main criteria of the accountants’ performance evaluation, because people make crucial decisions regarding the investments based on financial reporting. Every investor wishes that he should be able to get more, better and transparent information about the financial data of the company.. The best definition of transparent is “very clear”, “easily understood”, and “candid” and “frank”.[2] The scandals in the securities market such as those that were exposed in the corporations like Enron, Healthsouth, Parmalat and the telecommunications companies- WorldCom, Qwest, Sunbeam once more proved the importance of financial reporting transparency. In addition to being the largest bankruptcy reorganization in the American history, the Enron scandal undoubtedly is the biggest audit failure. The scandal caused the dissolution of Arthur Andersen, which at the time was one of the five largest accounting firms in the world. Many stakeholders were affected by these corporate scandals. Thousands of people lost their jobs, investments, pensions, and the general public lost confidence in the public company financial reporting. As a rapid response to the corporate scandals, Sarbanes –Oxley Act concerning securities market was signed by President George Bush in 2002 .The Act mandated numerous reforms to further corporate responsibility, enhanced financial disclosures to battle fraud, and created the Public Accounting Oversight Board to oversee the auditing profession. President Bush called the law “one of the most far-reaching reforms of American business practices since the time of Franklin Delano Roosevelt”. [3] The purpose of this paper is to investigate the effects of changes in legislation on accounting profession in the example of Sarbanes Oxley Act applied to the US legislation. The main objectives are: to get acquainted with the key sections that increase the accountants responsibility, to estimate and compare the results of SOX act with those before SOX introduction, and to look at changes in the sphere of accounting education.

Accountant responsibility increase
The first effect of Sarbanes-Oxley Act is a creation of additional responsibility to the accountants. This effect was a result of creating the Public Company Accounting Oversight Board (PCAOB). This represents the first time the accounting profession experienced direct external oversight by a government – sponsored...
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