MAYBE A BALLER INTRODUCTION HERE IDK CHECK LATER On July 30, 2002, the United States government enacted a law that set expanded or even completely new requirements for all United States public company management, boards and public accounting firms. This was the Sarbanes-Oxley Act, also known as the “Public Company Accounting Reform and Investor Protection Act” in the Senate, and the “Corporate and Auditing Accountability and Responsibility Act” in the House of Representatives. (REFERENCE). In addition to setting new requirements for public companies, there are also numerous provisions of the Act that apply to private companies as well. Included in these provisions is the willful destruction of evidence to impede a Federal investigation. (REFERENCE).
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According to a recent report from the federal accounting industry agency the Public Company Accounting Oversight Board, deficient audits performed by the Big Four accounting firms doubled in the year 2010, “reaching a somewhat horrifying 33 percent” (Brehmer, 2012). According to Brehmer (2012), the Sarbanes-Oxley Act was intended to reduce conflicts of interest by requiring pre-approval for non-audit services by auditors at the companies they audit, but unfortunately, the Act cannot be relied upon to shine light on independent violations. Other journalists, however, feel like there are other problems the bill does not address. Some believe that the real problem with corporate governance that the bill does not address is the board of directors. Following the Enron scandal specifically, Congress failed to set a high enough bar for corporate governance in America (Allen, 2012). Another frequently heard criticism of the bill is that complying with it is time-consuming and costly, especially for small public companies. The most serious criticism is directed at three particular sections—404, 406 and 409—under Title IV: Enhanced Financial Disclosures (Chowdhury, 2007), but mostly at Section 404 due its costliness and …show more content…
It is the most contentious aspect of the bill, where it requires management and the external auditor to report on the adequacy of the company’s internal control on financial reporting (Wang, 2008). One of the issues Chowdhury (2007) raised, about the cost-effectiveness of the bill, is posed in this section as this is the most costly aspect of the legislation for companies to implement. To help ease the high costs of compliance, practice and guidance have evolved to accommodate some of the expensive costs of the Act. The Public Company Accounting Oversight Board approved a couple standards for public accounting firms in the year 2007 to help alleviate these problems. Some of the things that the two standards together would require management to do is to assess both the design and operating effectiveness of selected internal control related to significant accounts and relevant assertions, perform a fraud risk assessment, scale the assessment based on the size and complexity of the company, as well as other steps in this process to conclude on the adequacy of internal control over financial reporting (Virag,
According to a recent report from the federal accounting industry agency the Public Company Accounting Oversight Board, deficient audits performed by the Big Four accounting firms doubled in the year 2010, “reaching a somewhat horrifying 33 percent” (Brehmer, 2012). According to Brehmer (2012), the Sarbanes-Oxley Act was intended to reduce conflicts of interest by requiring pre-approval for non-audit services by auditors at the companies they audit, but unfortunately, the Act cannot be relied upon to shine light on independent violations. Other journalists, however, feel like there are other problems the bill does not address. Some believe that the real problem with corporate governance that the bill does not address is the board of directors. Following the Enron scandal specifically, Congress failed to set a high enough bar for corporate governance in America (Allen, 2012). Another frequently heard criticism of the bill is that complying with it is time-consuming and costly, especially for small public companies. The most serious criticism is directed at three particular sections—404, 406 and 409—under Title IV: Enhanced Financial Disclosures (Chowdhury, 2007), but mostly at Section 404 due its costliness and …show more content…
It is the most contentious aspect of the bill, where it requires management and the external auditor to report on the adequacy of the company’s internal control on financial reporting (Wang, 2008). One of the issues Chowdhury (2007) raised, about the cost-effectiveness of the bill, is posed in this section as this is the most costly aspect of the legislation for companies to implement. To help ease the high costs of compliance, practice and guidance have evolved to accommodate some of the expensive costs of the Act. The Public Company Accounting Oversight Board approved a couple standards for public accounting firms in the year 2007 to help alleviate these problems. Some of the things that the two standards together would require management to do is to assess both the design and operating effectiveness of selected internal control related to significant accounts and relevant assertions, perform a fraud risk assessment, scale the assessment based on the size and complexity of the company, as well as other steps in this process to conclude on the adequacy of internal control over financial reporting (Virag,