Sarbanes Oxely

Topics: Internal control, Finance, Public company Pages: 6 (1870 words) Published: February 18, 2013

August 14, 2006

Need a Sarbanes Oxley Compliance Plan?
The Sarbanes-Oxley Act of 2002, sponsored by US Senator Paul Sarbanes and US Representative Michael Oxley, represents the biggest change to federal securities laws in decades. Effective in 2006, all publicly-traded companies are required to submit an annual report of the effectiveness of their internal accounting controls to the SEC. It came as a result of the large corporate financial scandals involving Enron, WorldCom, Global Crossing and Arthur Andersen. Provisions of the Sarbanes Oxley Act (SOX) detail criminal and civil penalties for noncompliance, certification of internal auditing, and increased financial disclosure. It affects public U.S. companies and non-U.S. companies with a U.S. presence. SOX is all about corporate governance and financial disclosure. High-profile business failures culminating in a media fixation on Enron called into question the effectiveness of business’ self-regulatory process as well as the effectiveness of the audit to uphold public trust in capital markets. Legislation to address shortcomings in financial reporting was slowly progressing in Congress. The sudden collapse of WorldCom guaranteed swift congressional action. President Bush signed the Sarbanes-Oxley Act in to Law on July 22, 2002. The most significant legislation affecting the accounting profession since 1933. Developing meaningful reforms that protect the public interest and restore confidence in the accounting profession is the primary focus of the SOX legislation. The SEC labored long and hard to communicate to the media, the public and to CPAs (Certified Public Accountant) that it will not tolerate any substandard work that veers away from the fundamental code of ethics and responsibilities that have defined the CPA profession for more than 100 years. Their profession's core values have always integrity, competence and objectivity. SOX legislation reminded auditors of their responsibilities and influence in measures that distinguish between auditors of publicly traded companies and those of private entities as well as SOX goals to strengthen the capital market system and increase investor confidence. However, SOX also brings uncharted waters for the CPA profession, particularly in the areas of standard setting and quality review. The AICPA (Accounting Institute of Certified Public Accountants) has been studying these changes and has initiated efforts to help members navigate this complex situation. This article is designed to spell out some of the more significant provisions for the profession and provide an overview of SOX to help you understand the changes and their impact, both positive and negative. Summary of Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act (Public Law 107-204) impacts not just the large accounting firms, but any CPA actively working as an auditor of, or for, a publicly traded company or any CPA working in the financial management area of a public company. Essentially, the Act creates a five-member Public Company Accounting Oversight Board (PCAOB), which has the authority to set and enforce auditing, attestation, quality control and ethics (including independence) standards for auditors of public companies. It also is empowered to inspect the auditing operations of public accounting firms that audit public companies as well as impose disciplinary and remedial sanctions for violations of the board's rules, securities laws and professional auditing and accounting standards. Other provisions affecting the profession include requiring the rotation of the lead audit partner and reviewing audit partner every five years, and extending the statute of limitations for the discovery of fraud to two years from the date of discovery and five years after the act (previously one year and three, respectively). The law restricts the consulting work...
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