CPA's and Audit Reports

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CPA's and Audit Reports

The effects of the Sarbanes-Oxley Act on the CPA profession:

The Sarbanes-Oxley Act positive effect is that it creates penalties that are tough to those who fail to report fraud, commit securities fraud and penalties to people who destroy records. These provisions will prevent insider trading whenever there are periods of blackouts and also bans loans to the executives. The act also requires that the audit reports should include the testing of the internal controls. The management will be required to make and assess presentations about the effectiveness of the person issuing the financial report and the effectiveness of the structure of the internal controls. All the services that are provided by the auditors must be approved by the Audit Committees. New information must be reported to the audit committee by the auditor (McDermott, n.d).

The new information should include the communications that occur between the management and the auditor, the disagreements in accounting between the management and the auditor, how the financial information can be treated differently and the critical accounting practices and policies. The negative effect of this act is that if one of the top officials of the company worked on the auditing of the company and was also employed by the firm during the previous year, then the public company cannot be provided with the auditing services by the accounting firm. The other effect is that auditors are prohibited from providing services such as expert or legal services, investment banking services, human resources and management services, internal audits, actuarial, bookkeeping and appraisal services (McDermott, n.d).

Role of the American Institute of Certified Public Accountants:

The role of the American Institute of certified public accountants is that it sets the accounting standards. The formation of the board of accounting principles was done by the AICPA which formed the committees whose task was to develop the financial report. The task of the financial accounting standards board was ...