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Sarbanes Oxley

Have you ever thought about why companies have to reinvent themselves, just to keep from having to go out of business, because of changing business conditions? Please give your comments and thoughts.

Sarbanes-Oxley Act of 2002 has been described as the most far-reaching legislation affecting business since the passage of the 1933 Securities Act. Do you believe the legislation enhances the power and prestige of the accounting profession, or alternatively, does it decrease both the power and prestige of the profession? Explain.

Have any companies that would have been under the ACT gone private and delisted from one of the stock exchanges just to get out from under the act. What would be the reason?
Give pros and cons of such action. Has this changed in any way the relationship between a CFO and the Board of Directors and/ or the independent auditor?

Why are internal controls important?

Can a company put too much emphases time and money on internal controls?
Why would an accountant be interested in knowing about Auditing standard #5 on internal controls?

Why is it management's responsibility to develop and put in place an effective internal control system?
Why should the CFO take the lead on this project?

What do you think is the main difference between accounting and auditing?
What is the difference between internal auditors and accountants?
What do external independent auditors do when they audit a Corporation?
Should all accounting errors made during the year also be corrected during the year even if first discovered during the year-end audit?

Solution Preview

Q: Have you ever thought about why companies have to reinvent themselves, just to keep from having to go out of business, because of changing business conditions? Please give your comments and thoughts.

A: Yes, I've thought about his. Competition is a constant force. In an effort to win more customers, business try new things. So, your competitors are trying new things all the time and some of them are going to work. If you don't pay attention and respond to "one up" or match their moves you will lose customers.

Q: Sarbanes-Oxley Act of 2002 has been described as the most far-reaching legislation affecting business since the passage of the 1933 Securities Act. Do you believe the legislation enhances the power and prestige of the accounting profession, or alternatively, does it decrease both the power and prestige of the profession? Explain.

A: Sarbanes-Oxley Act of 2002 (SOX) did not improve the prestige of the profession. It might have improved the prestige or power of some of the players in the profession, notably those that serve at PCABO - those that audit the auditor. If anything, it might have decreased the prestige a bit because the regulators felt the auditors needed to be audited themselves. Yikes! SOX did help improve the power of the profession by having the auditor report the board and not to management.

Q: Have any companies that would have been under the ACT gone private and delisted from one of the stock exchanges just to get out from under the act. What would be the reason?
Give pro's and cons of such action. Has this changed in any way the relationship between a CFO ...

Solution Summary

Your response is 752 words in everyday language suitable for a student enrolled in a first auditing class. Most questions are answered in two-three sentences. A few answers are a bit longer. Two firms that went private after SOX are given as examples.

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