Sarbanes Oxley Act of 2002
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In the past several years the Sarbanes Oxley Act of 2002 has heavily affected the practice of accounting. The increase of accounting scandals called for changes, which would lead to the closure of many companies and people punished for unethical criminal activities. The Sarbanes Oxley Act led to the creation of the Public Company Accounting Oversight Board. In recent years inspections for public companies would typically stop at the inspectors level, but now the Public Accounting Oversight Board inspects the audits and auditors of public companies. The Sarbanes Oxley Act has also tightened up on the responsibilities of Chief Executive Officers and Chief Financial Officers, requiring them to certify statements submitted to the Securities and Exchange Commission.
The Sarbanes Oxley Act of 2002 can be looked at as the worst nightmare for fraudulent, unethical individuals. In align with Public Accounting Oversight Board, SOX requires all public companies issue a report on the organizations structure, work and authority flows, people and management information systems. Internal controls in compliance with the Sarbanes Oxley Act role is to perform a fraud a fraud and risk assessment and assess related controls. This may require an organization to identify situations where theft or loss can occur and determine if existing control procedures effectively manage the risk to an acceptable level.
Today we still face unethical and fraudulent practices within companies. There has been question as to weather or not the Sarbanes Oxley Act has led to accounting departments and companies to change, including larger organization vs. smaller ones. The one fact that remains with big players to smaller ones is the money effect, which at times can persuade the most honest people. With the question of judgment on the SOXs affect at hand there was a survey conducted revealing that there has been changes within organization accounting practices and an increase of overall quality of accounting reporting practices.
“The reputation of the accounting and auditing professions has suffered greatly over the last few years. The positive changes resulting from increased public scrutiny should help restore public confidence in financial reporting and in the accounting and auditing professions. More important, an increase in reporting quality should serve to prevent major corporate collapses due to accounting scandals in the future” (Nichols,2006).