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The Sarbanes-Oxley Act and the PCAOB

Assuming that you are the controller for a publicly traded company, your CFO has asked you to prepare a presentation for the accounting department personnel and the public auditors about the importance of the SOX Act and the requirements and responsibilities that the Act establishes for the auditors in charge of an annual audit. After the presentation, the CFO wants all accounting personnel and public accounting auditors to understand the regulations and guidelines established by the SOX Act and also for you to provide recommendations as to how the Act's principles can be improved to make American corporations more ethically responsible.

Prepare a Power Point presentation of at least 20 slides that includes the following:

1. Assess the provision of the Sox Act that requires the establishment of the Public Company Accounting Oversight Board (PCAOB) and the measures that public accounting firms are taking to ensure that they maintain their independence in all audit assignments, including the mechanisms they are establishing to ensure that the necessary independence and integrity are prevalent in all aspects of their relationship with their clients.
Analyze how executives of corporate America have embraced the new regulations and requirements of the Sox Act while maintaining their purpose to produce a profit for investors and staying in compliance of the new rules in the industry. Explain what those new requirements are for the CEO and CFO of publicly traded companies.
Describe your assessment of the responsibilities established for accounting personnel: including protection for whistle-blowers and for the public accounting auditors.

2. Determine how the responsibilities of the board of directors audit committee have changed due to the Sox Act in overseeing the financial reporting process and to hire and be in charge of the independent auditors.
Provide recommended sanctions to be imposed on those who do not comply with the SOX Act provisions, and whether or not the sanctions should be stiffened or should include other personnel in the organization.
Researched sources should follow these guidelines:

Solution Preview

Public Company Accounting Oversight Board
Section of 101 of the SOX gives the Public Company Accounting Oversight Board, wide ranging powers.
It can set registering requirements.
Set standards related to auditing, quality control, ethics, independence, and other standards.
Conduct inspections of CPA firms. (Anand. S, 2011)

Section 101 SOX Gives Powers To:
Carry out investigations;
Commence disciplinary proceedings;
Impose punishments on public accounting firms.
It can impose fines up to $2 million on CPA firms.
Take any action to improve standards of CPAs.
Conduct operations in any part of the US. (Anand. S, 2011)

PCAOB Has Powers To:
Overseeing, inspecting, and regulating CPA firms when they audit public companies.
It sets standards for independence of auditors, corporate governance, internal control assessment, and increased financial disclosure.
It sets limits on the auditing firms to provide non-audit services to their audit customers.
The board may require audit firms to provide testimony/documents. On refusal the person may be suspended or debarred. (Stimson. W, 2011)

The Constitutionality of the Board was Challenged:
The constitutionality of the formation of the board was challenged in the US Supreme Court but the court upheld the constitutionality of the board.
The Board operates, subject to the approval and oversight by SEC.
CPAs or firms against whom the Public Company Accounting Oversight Board, takes action may appeal to the Securities and Exchange Commission

Sox Compliance Costly?
Section 404 compliance was believed to be costly. However, the benefits of improved internal control have outweighed the costs.
Benefits relating to improved investor confidence, reliability of financial statements, and fraud prevention.
The executives of public companies have complained about the high costs such as, auditor fees, directors and officers insurance, board compensation, ...

Solution Summary

This posting gives you a step-by-step explanation of The Sarbanes-Oxley Act. The response also contains the sources used.