Sarbanes-Oxley Act Article Analysis

Topics: Internal control, Audit, Auditing Pages: 3 (879 words) Published: October 28, 2013

Integrated Accounting Cycle Final Report and Presentation

October 15, 2013.

Integrated Accounting Cycle Final Report and Presentation
A decade ago, fighting financial reporting fraud became the most important aspect of doing business, as large corporations filed for bankruptcy because their lack of internal controls. As a response to that lack of financial accountability, the government passed the U.S. Sarbanes-Oxley Act of 2002, with the goal in mind to restore the confidence of investors, while protecting the capital markets. The government recognized the need for corporations and businesses to have strong internal controls in place, as an important element for rebuilding confidence and trust. Section 404 of the act stresses the need to perform an annual evaluation of internal controls and procedures for financial reporting. This internal control requires for management to certify the effectiveness and accuracy of these controls. In addition, the Sarbanes-Oxley requires for a company to hire an external auditor to complete a separate report, verifying the effectiveness of the internal controls and procedures for financial reporting. This assessment will validate the internal control structure of the company, providing management and public accountants with the confidence that the company is keeping a strong internal control structure, evaluating and correcting any deficiency of the organization’s financial reporting. It has been a decade after Sarbanes-Oxley Act of 2002, (SOX) was passed; the traditional internal audits were replaced with the required internal controls under Section 404. As the new internal controls have become routine, corporations are now considering how to better the skills of their internal audit team. SOX has increased criminal penalties and imposed maximum terms in prison for those individuals involved in various kinds of financial fraud. Wrongdoers face criminal charges over false statement...
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