...Sarika Bond Auditing-Ambler Short Essay #2 November 3, 2009 Sarbanes-Oxley Act Provisions Publicly held companies are mandated to specific regulations of Sarbanes-Oxley Act; while privately held and non-profit companies are not specifically required to adopt the provisions of Sarbanes-Oxley Act (SOX). I don’t agree with private companies adopting the entire provision of Sarbanes-Oxley Act. I do support adopting certain parts of the Sarbanes-Oxley Act provision. It is cost prohibitive for private and nonprofit companies, especially for small private companies. Private companies and non-profit companies do not have to adopt the provision of Sarbanes-Oxley act, but they may pick and choose part of the governing principals that apply to them. There are advantages and disadvantages to adopting The Sarbanes-Oxley Act for private and non-profit companies. The advantages are that private companies that intend to go public in the future have already established an auditing committee, a whistleblower protection policy, and improved internal controls. The disadvantages are it is costly to adopt Sarbanes-Oxley Acts and requires hiring an outside independent auditor. It also creates more paperwork, such as checklist full of questions. My main argument with not adopting the entire Sarbanes-Oxley Act is that it is very costly for small private companies. “A survey of more than 300 public companies by Financial Executives International determined an average, first-year compliance...
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...Adoption of the Sarbanes-Oxley Act of 2002 Accounting 100: Accounting I March 19, 2011 Strayer University Adoption of the Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002, commonly called the SOX, is a United States federal law that was passed in response to a number of major corporate and accounting scandals (veracode.com/solutions/sox-compliance.html, 2011). The act was passed to strengthen corporate governance and restore investor confidence. It was sponsored by US Senator Paul Sarbanes and US Representative Michael Oxley. The act was passed in response to a number of major corporate and accounting scandals, the most popular being Enron, in the United States (audit-is.com/legislation/sox.htm, 2011). As a result of Enron’s scandal and public bankruptcy, congress passed the act which required all public companies that have business in the United States to have an accounting framework (Nelson & Stanley, 2011). The Sarbanes-Oxley Act made it mandatory for all public companies to contain internal financial auditing controls and to present the results in annual assessments. The results must be reported to the Securities and Exchange Commission (SEC) on an annual basis. Furthermore, the Sarbanes-Oxley Act of 2002 requires all public companies to have an external auditor. The external auditor will audit the company’s internal control reports of management and their financial statements (Baker, Bealing Jr, Nelson & Stanley, 2011). In this...
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...Comparing IFRS to GAAP In financial reporting the U.S uses the generally accepted accounting principles, to record and report. The international financial reporting standards have been used in over 110 countries all over the world. The have similarities but are very different in structure as well, the GAAP is rules based and the IFRS is more principle based when it comes to financial reporting. I will cover some of these difference and similarities in this essay. In what ways does the format of a statement of financial position under the IFRS often differ from a balance sheet presented under GAAP? The IFRS does not require that the statement of financial position be put into a specific order, when reporting financial information. However most under companies IFRS will report their assets in reverse order of liquidity. Under the GAAP companies are required, to report all accounts in specific order by liquidity. Do the IFRS and GAAP conceptual frameworks differ in terms of the objective of financial reporting? No the objectives are both the same for the GAAP and IFRS, they have very similar ways of reporting financial information. They both want companies to keep the information they report up to date, and data needs to be reported in an honest manner. All data reported should also be useful, to an investor, creditor, or regulator. When information is reported correctly, companies are abiding by the industry standard set forth. What terms commonly used under IFRS are synonymous...
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...financial markets and mergers crossing international borders has become the new norm because of the advances in technology. This has led to many people calling for one set of international accounting standards. I will compare the international standard known as IFRS to the U.S. standard known as GAAP. IFRS The International Financial Reporting Standards (IFRS) was developed by the International Accounting Standards Board (IASB). Currently, there are 115 countries using the IFRS. GAAP The United States uses the General Accepted Accounting Principles (GAAP), which was created by the Financial Accounting Standards Board (FASB), and officially recognized by the Securities and Exchange Commission (SEC). SOX Sarbanes-Oxley Act (SOX) created the internal control standards that apply to publicly traded companies on U.S. exchanges. Rules or Principles The purpose of IFRS and GAAP are conceptually the same. They both set out to establish accurate objective financial transparency for the use of investors and creditors. The main difference is the approach each take. The IFRS has easier requirements for accounting and reporting. Thus, it has been called a principle based system, whereas the GAAP is considered rules based. To provide an example of the rules-based and principle-based concept one only has to look at the way they each handle revenue recognition. According to Kimmel (2012), the GAAP has over 100 rules regarding revenue recognition....
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...Senator Paul Sarbanes and Representative Michael Oxley. The act arrangement is under eleven section or titles; however, some of the sections of the Sarbanes-Oxley Act of 2002 are considered to be more important than others, mainly 302, 401, 404, 409, 802 and 906 (full act available on-line at http://www.law.uc.edu/CCL/SOact/toc.html). SOX was a swift reaction to public outcry following corporate scandals, Congress imposed new obligations on directors, executives, lawyers, accountants, and many other entities. Many argue that this was done without due consideration to the Act's possibly adverse effects. The Sarbanes-Oxley Act of 2002 was introduced following a number of court cases of fraud and mismanaging of financial statements by major corporations (e.g., Enron and others). It was deemed necessary because it was quite obvious from the growing number of corporate scandals and resultant public outrage that the corporate world needed more oversight as more and more questionable corporate acts and financial manipulations took center stage in the media and the courts. This means that the quick response of Congress-and the Sarbanes-Oxley Act of 2002 (SOX) was created mainly to bolster the public's confidence in corporate governance and financial reporting of the public companies mainly through rebuilding public trust in corporations and capital markets In other words, the new law was in reaction to several main corporate and accounting...
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...Accountability and Responsibility Act' (in the House) and more commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law that set new or enhanced standards for all U.S. public company boards, management and public accounting firms. It is named after sponsors U.S. Senator Paul Sarbanes (D-MD) and U.S. Representative Michael G. Oxley (R-OH). As a result of SOX, top management must now individually certify the accuracy of financial information. In addition, penalties for fraudulent financial activity are much more severe. Also, SOX increased the independence of the outside auditors who review the accuracy of corporate financial statements, and increased the oversight role of boards of directors.[1] The bill was enacted as a reaction to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals, which cost investors billions of dollars when the share prices of affected companies collapsed, shook public confidence in the nation's securities markets. The act contains 11 titles, or sections, ranging from additional corporate board responsibilities to criminal penalties, and requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the law. Harvey Pitt, the 26th chairman of the SEC, led the SEC in the adoption of dozens of rules to implement the Sarbanes–Oxley Act. It created a new, quasi-public agency, the Public...
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...Adoption of the Sarbanes-Oxley Act of 2002 ACC 100. Accounting Professor Hiotellis June 4, 2011 New Standards for U.S. Public Companies The Sarbanes-Oxley Act imposed a series of “enhanced” standards on publicly traded companies intended to ensure financial reports were being reported accurately to the public. Among others, these enhanced standards include: • Companies must maintain adequate controls over financial reporting. • Companies must provide a statement regarding the method the company uses for evaluating their control over financial reporting controls. • Companies must disclose any material weaknesses in their accounting controls. • Auditors must issue an attestation regarding the managements own assessment of its financial reporting capabilities. Why the new enhanced standards are necessary Congress passed the Sarbanes-Oxley Act of 2002 in reaction to accounting scandals involving well-known companies like Enron, WorldCom, and Tyco that were inaccurately reporting financial information over a period of years. Through close relationships with accounting firms that amounted to conflicts of interest, these companies were able to perpetuate their fraudulent financial reporting. One noted accounting firm – Arthur Anderson – was forced to shut down because of the scandal, though several other accounting firms were also implicated. The story of Enron’s demise and the financial fraud that lead to it is perhaps the most well-known...
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...IFRS Versus GAAP TEAM A Anna Brandon ACC/290 Octuber 8th, 2014 Pat Maccon IFRS Versus GAAP If aiming to invest in emergent markets or to get involved in any kind of business, it is relevant to acknowledge the world’s two main accounting systems: Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). GAAP standards provide direction for almost every accounting setting, including inventory accounting methods and procedures. GAAP is used principally in the United States, although the Security and Exchange Commission (SEC) is looking to switch to IFRS by 2015, the system used in the European Union and many other countries. Many countries have their own accounting systems, although most conform to one main system or the other as they work to keep their markets modern. In fact, the SEC must consider some challenging points before deciding whether the United States should adopt IFRS. For example, companies must ensure that their accounting departments and outside auditors are properly prepared for conversion to IFRS. Conversion may require software upgrades or other adjustments to ensure that data necessary for IFRS reporting are properly being gathered. In addition, because U.S. GAAP and IFRS standards may differ, management will have to re-evaluate the efficiency of internal controls in expectancy of IFRS conversion. Controls must be modified or added. Management will also need to ensure that the issuer's independent auditor...
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...Adoption of the Sarbanes-Oxley Act of 2002 as an Important Piece of Legislation Accounting I 02/27/2011 Analyze the new or enhanced standards for all U.S. public company boards, management, and public accounting firms that the SOX required. The main purpose of the Sarbanes Oxley Act was to establish an accountable system of regulations and policies to ensure proper compliance. The set of standards and deadlines the act put into place was mainly in response to an alarming amount of corporate and accounting scandals. With hopes of restoring the nation’s faith in its capital market, this government enacted legislation was divided into eleven sections that ranged from additional penalties to the establishment of a new accounting oversight committee, the Public Company Accounting Oversight Board. Overall the new standards made publicly held corporations more liable for their actions or inactions, and even set in place procedures to apply to new legislation. The first tittle of the SOX established the Public Company Accounting Oversight Board (PCAOB), and their purpose was to deliver proper registration of all auditors as well as ensure proper compliance with specific mandates. Part of the first title was also the exact definition of specific processes and procedures that all auditors must adhere to while performing their duties. The board also established policies that emphasized the importance of policing conduct, verifying compliance, and ensuring exceptional quality control...
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...control consists of all the related methods and measures adopted within an organization to safeguard its assets, enhance the reliability of its accounting records, increase efficiency of operations, and ensure compliance with laws and regulations”(pg. 338). This report assists to detail observations and recommendations regarding the current internal controls of the LJB Company. In LJB plans to take the company public, GG Accounting Firm has measured LJB compliance under the Sarbanes-Oxley Act of 2002 (SOX) standards. GG Accounting Firm has addressed current practices and has made suggestions that could increase the LJB Companies chances in their endeavor. The internal control recommendations will be based on the six principles of control activities listed as follows: •Establishment of responsibility •Segregation of duties •Documentation procedures •Physical controls •Independent internal verification •Human resource controls Internal Control Paul D. Kimmel states, “Under SOX, all publicly traded U.S. corporations are required to maintain an adequate system of internal control. Corporate...
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...date of shipment. However, the customer requested that Excello hold on to the product until January 11, 2011, because Data Equipment lacked the warehouse capacity to hold the product until then. The firm must adhere to all the laws and other regulations as set. Among the regulations include Generally Accepted Accounting Principles (GAAP), Sarbanes-Oxley Act of 2002 (SOX), and AICPA code of conduct. The rules impact the mechanism, of financial reporting in the company and also help sin the actions of major principles of accounting. As a result of this, the accounting team must ensure they get the best method that will help in maximizing g the wealth of the shareholders. Albeit the earnings estimates could be gotten through the adoption of illegal treatment of accounting books, it would not be of more help to the firm as it would be more disastrous when the Wall Street detected it. There are a number of rules that Excello must follow to comply with if it is to fall in line with accounting actions, especially when it comes to posting dealing as well as financial statements. Some of the regulations include the SOX act of 2002, the GAAP as well as the AICPA Code of Conduct. Excello’s...
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...Sarbanes-Oxley Act of 2002 The Act & Impact The Sarbanes-Oxley Act of 2002 was signed into law following the wake of corporate financial scandals. Many large companies such as Enron, WorldCom, and Arthur Anderson were affected. The Act provides a solid set of government rules that are aimed to discourage and punish corporate and accounting fraud, as well as corruption. SOX is designed to carry out these tasks by imposing severe penalties for wrong doings, while protecting the interest of workers and shareholders. The stated purposed to protect investors is maintained by improving the accuracy and reliability of corporate disclosures, imposing strict rules for audits and auditors of publically traded companies, preventing insider trading and deals, requiring companies to adopt strict internal controls, and increasing the penalties for white collar crimes as they relate to investor fraud. The Sarbanes-Oxley Act of 2002 is often best understood, not as a piece of legislation centered on a new concept of regulation, but as a process which mandated that many major reforms be implemented as soon as possible. SOX became effective on July 30, 2002 as a new penal law, 18 U.S.C. #1348. (Zameeruddin, 2005) This précised...
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...Sarbanes-Oxley been Successful? The Sarbanes-Oxley Act (SOX) was enacted on July 30th, 2002. The bill is comprised of eleven different sections that cover quite a large amount of topics. Prior to the enactment of the Sarbanes-Oxley Act, there were several highly controversial and heavily scrutinized cases of corporate fraud that included the infamous Enron, Tyco, and WorldCom. These scandals cost investors billions of dollars when the share prices of these companies collapsed after the cases were filed. These cases of fraud indicated to both the public and the government that there was not enough regulation over financial statements of publically traded companies specifically. It focused specifically on publically traded companies to contain the fallout of lost investor’s money when these frauds come to light and the stock prices plummet. In order to fix these problems Congress rushed the Sarbanes-Oxley Act through both the House and Senate. This Act was one of the largest pieces of financial information legislation since the securities acts of 1933 and 1934 (Sweeney 2012). The Sarbanes-Oxley Act has faced quite a lot of criticism, but it has been quite successful. SOX legislation has for most come at rather high regulatory costs. The average annual compliance costs were $2.9 million prior to 2007 and $2.3 million since then (Singer & You 2011, pg 557). While it’s completely understandable why that large of a bill would draw criticism, SOX has been incredibly successful at preventing...
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...Sarbanes-Oxley Act (SOX) The accounting industry as a whole endured quite a lot of publicity in last few years. Accounting scandals at mega-corporations likes Tyco, Enron, and WorldCom had made the public painfully aware of the limitations of internal accounting practices and the apparent ease with which corporate executives can manipulate the industry and report false financial information. In light of that limitation, the United States government passed the Sarbanes-Oxley Act (SOX) in 2002, which was primarily intended to restore the public's trust in public accounting. The act was approved by the House by a vote of 421 in favor, 3 opposed, and 8 abstaining and by the Senate with a vote of 99 in favor, 1 abstaining. President George W. Bush signed it into law, stating it included "the most far-reaching reforms of American business practices since the time of Franklin D. Roosevelt." The Sarbanes-Oxley act provides stiff punishments for those at the helm of companies and fines of over $5 million for violation of the laws. The act is named after senator Sarbanes and Oxley who are the architects of the act. Sarbanes-Oxley Act was meant to introduce regulation to corporate governance and financial accounting. The act brought in mandatory rules regarding the internal financial controls. The Sarbanes Oxley act was assented to by the President on 30th July 2002 and principally applies to the issues as stated in the securities act, that is public issues and companies with...
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...known as the 'Public Company Accounting Reform and Investor Protection Act' (in the Senate) and 'Corporate and Auditing Accountability and Responsibility Act' (in the House) and commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law enacted on July 30, 2002, which set new or enhanced standards for all U.S. public company boards, management and public accounting firms. It is named after sponsors U.S. Senator Paul Sarbanes (D-MD) and U.S. Representative Michael G. Oxley (R-OH). The bill was enacted as a reaction to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals, which cost investors billions of dollars when the share prices of affected companies collapsed, shook public confidence in the nation's securities markets. The Sarbanes-Oxley Act does not apply to privately held companies. The act contains 11 titles, or sections, ranging from additional corporate board responsibilities to criminal penalties, and requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the new law. Harvey Pitt, the 26th chairman of the Securities and Exchange Commission (SEC), led the SEC in the adoption of dozens of rules to implement the Sarbanes–Oxley Act. It created a new, quasi-public agency, the Public Company Accounting Oversight Board, or PCAOB, charged with overseeing, regulating, inspecting and disciplining accounting...
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