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Sarbanes oxley act effect on internnal control essay

Adela Helenka Belin Surname 1! Accounting and Finance Academic Level: S Number of Pages: How SOX changed the accounting industry when it was implemented.

The background data that lead to the SOX overhaul and has it accomplished what it was drafted to do?

  1. Koehn, Jo Lynne, and Stephen C.
  2. SOX also requires that an external auditor comment on whether the management observes the internal control over the organization's financial reporting maintenance.
  3. Conclusion In a nutshell, SOX has proved its significance in the accounting industry, whereby several economies have improved since its implementation.
  4. Also, state how you plan to approach your topic. Guide to the Sarbanes-Oxley Act.

What is the chief reason you are writing the paper? Also, state how you plan to approach your topic. Is this a factual report, a book review, a comparison, or an analysis of a problem?

Explain briefly the major points you plan to cover in your paper and why readers should be interested in your topic. BODY - This is where you present your arguments to support your thesis statement. Remember the Rule of Three: Find three supporting arguments for each position you take. Begin with a strong argument, then use a stronger one and end with the most persuasive argument for your final point. Explain why you have come to this particular conclusion.

This would extend to States and Countries within the United States for more comparisons cases if any. This will help learners understand how the SOX Act can be used to solve problem situations in the accounting industry. Glover, and Douglas F. Auditing and Assurance Services. Guide to the Sarbanes-Oxley Act: An Internal procedure design should provide correct financial disclosures, whereby SOX requires that signatories to an established internal control claim such responsibilities.

Officers as part of the requirement need to evaluate and present their conclusions in the reports about the efficiency of their internal control over the basis of their evaluations. SOX also requires that an external auditor comment on whether the management observes the internal control over the organization's financial reporting maintenance.

SOX Act regulates the disclosure of items in the periodic reports. This regulation stimulated by the Enron bankruptcy brought much attention in organizations by advising them to consider their off-balance sheet particulars.

Without considering such items, an organization or individual may engage in fraudulent activities while taking advantage of the instruments. The section requires an organization to involve; established and maintained internal records and assessed internal controls when showing its effectiveness to the public.

Another change experienced in the accounting industry is the inappropriate influence on the accomplishments of audits. SOX provides rules for prohibition, enforcement, no preemption of other laws and deadlines for rulemakings about audits perceived to have been conducted inappropriately.

The commission also has privatized authority to impose this section as well as any rule issued pursuant to this article. The background data that led to the overhaul of SOX Large corporate fraudulent activities occurred between the years 2000 to 2002, owing to the varied, complex factors that created conditions and cultures favoring such activities.

Cases in point are the highly publicized fraudulent operations at Enron and WorldCom, which exposed essential problems associated with conflicting interests and practices to incentive compensation 7.

Some of the factors that promoted fraud during the period mentioned above included; Inadequate financing of the SEC: Audit committees hold the responsibility for the establishment of omission mechanisms for financial reporting of the U. S companies on behalf of their investors. The scandals came to establish that some board members had failed to meet their responsibilities, also to not having adequate proficiency to understand complexities of business.

A firm borrowing loans and debts tend to signal investors about its risks.

  • S companies on behalf of their investors;
  • This regulation stimulated by the Enron bankruptcy brought much attention in organizations by advising them to consider their off-balance sheet particulars;
  • This is because the SOX ensures the provision of precise and accurate financial statements, disclosing all the required information that both the public and investors deem vital for their decision-making processes;
  • In the long run, the firm suffered from bad debts and massive payment settlements it had to pay.

A case in point is the Enron scandal, which issued loans to organizations while ignoring the 7 Ibid Surname 7!

In the long run, the firm suffered from bad debts and massive payment settlements it had to pay.

This called for action, which was the implementation of the SOX Act. Therefore, with a large bonus based on stock, managers were experienced pressure to meet the stated targets.

From the above mentioned indicators, Each one of them posed a problem that needed to be controlled, leading to SOX bill being proposed by Senator Paul Sarbanes and the Representative Michael Oxley on July 30, 2002. In fact, the proposal came to be legal and has had an effect towards the accounting industry over the years as seen in this paper. This proves how the SOX Act has achieved its drafted accomplishments.

Conclusion In a nutshell, SOX has proved its significance in the accounting industry, whereby several economies have improved since its implementation. This is because the SOX ensures the provision of precise and accurate financial statements, disclosing all the required information that both the public and investors deem vital for their decision-making processes.

As seen in this paper, SOX encourages transparency of the organization's financial performance through prohibiting fraud and illegal activities that mutual fund managers are likely to engage in. Koehn, Jo Lynne, and Stephen C.