As a result of the sudden collapse of many successful firms and the increased incidents of fraud in financial reporting that were witnessed at the beginning of this century, investors lost confidence in reported accounting information and the auditors who attest to accuracy and transparency of financial statements. The SEC imposed tougher corporate governance and accounting regulations in 2002 known as Sarbanes-Oxley Act (SOX).
State the specific SOX regulations that aim at promoting transparency in corporate reporting and raising professional accounting standards.
The Sarbanes Oxley Act was enacted to ensure that there is transparency in the corporate sector. As a result, companies are required to provide full disclosure of information when asked of them. The act came about as a result of investors being affected by the way corporations provided their services. Therefore, the purpose of the act was to protect investors from fraudulent accounting practices by those corporations. In order to satisfy the purpose of the Sarbanes Oxley Act, information must be provided in real time. An increased set of responsibilities delegated to the audit committee also helps fulfill the purpose of Sarbanes Oxley Act. In order to fulfill the requirements of the Sarbanes Oxley Act, public auditors are subjected to increased regulatory control of the Securities and Exchange Commission which has recently formed the Public Company Accounting Oversight Board for this purpose. Companies that do not comply with the Act can face serious consequences with the SEC; those consequences may include the company ...
About Sarbanes Oxley and financial transparency.
How the Sarbanes Oxley Act Changed the Audit Environment
Can you please help me with the following questions:
a. Identify how the Sarbanes-Oxley Act of 2002 changed the audit environment for auditors.
b. Identify and explain new liabilities for managements of public companies created by the Sarbanes-Oxley Act of 2002.
c. Identify five other ways in which the Private Securities Reform Act of 1995 will potentially change auditors' legal liability. Explain how each is of potential benefit to the auditor.