During the time period of 1990 to 2000 financial statement fraud was pretty common. Various firms were engaged in financial fraud without thinking that the investors, and other stakeholders rely on those financial statements and the opinion of the auditor on those financial statements. The Sarbanes-Oxley Act was created because of the multiple accounting scandals of WorldCom & Enron in July 30, 2002. Because of that the investors lose billions of dollars, this negatively impacted financial stock market. Fraudulent accounting transaction and activities of immense business give rise to SOX. SOX was created to end self-regulations of the public accounting firms. It created Public Company Oversight Board (PCAOB), which is an independent, nonprofit organization, which can make it more credible. As it doesn’t have no outsider influence. It has given power by the SEC to control and implement the regulations of the accounting field.
Because of the regulations of SOX and PCAOB it is compulsory for all accounting firms to register and issue their audit reports. It is created to investigate and question accounting practices and make sure they are following laws and regulations. Anyone who goes against those laws and regulations will get find and disciplinary actions would be taken against that …show more content…
This act also put responsibility on the management to establish and maintain internal control of financial reporting which can also increase the credibility of the financial statements and create a sustainable internal control environment. Further, it requires that their financial reports include a statement about their code of ethics of senior management. And the reason if they don’t have code of ethics. I think this can also put pressure on the management to have a code of ethics and to implement those codes of
Because of the regulations of SOX and PCAOB it is compulsory for all accounting firms to register and issue their audit reports. It is created to investigate and question accounting practices and make sure they are following laws and regulations. Anyone who goes against those laws and regulations will get find and disciplinary actions would be taken against that …show more content…
This act also put responsibility on the management to establish and maintain internal control of financial reporting which can also increase the credibility of the financial statements and create a sustainable internal control environment. Further, it requires that their financial reports include a statement about their code of ethics of senior management. And the reason if they don’t have code of ethics. I think this can also put pressure on the management to have a code of ethics and to implement those codes of