Sarbanes-Oxley Act
The fraudulent misrepresentations of several public companies' financial positions have recently been brought into the public eye. The large bankruptcy of WorldCom and the similar conspiracies at Enron and HealthSouth made it clear that something had to be done to avoid such schemes. These scams were not only deceiving trusting investors, but also harming the good names of accountants everywhere. In an effort to prevent such occurrences, the Securities and Exchange Commission formed the Sarbanes-Oxley Act of 2002. This legislation alone has completely transformed the U.S. security regulations ("New Financial Rules" 2004, 1). The Sarbanes-Oxley Act's objective is to strengthen public companies' guidelines for financial reporting, internal controls, and auditing standards. In doing so, fraudulent activities will be caught regularly and future scams can possibly be deterred. The Sarbanes-Oxley act ultimately places more accountability on CEOs, CFOs, audit committees, and also independent auditors. It entails the verification that each company has satisfactory internal controls and that guidelines for financial reporting are established. All in all, the act aims to ensure near accuracy in reportin
It makes for better decision-making (Chavez 2004, 3) and helps to detect fraudulent activities ("New Financial Rules" 2004, 1). Small and Midsize Company Concerns In dealing with compliance costs, Colleen Sayther of FEI (Financial Executives Institute) states, "It stands to reason that larger, more complex companies will incur higher costs. Such software is programmed to help aid in compliance and increase ease of communication. New Financial Rules Could Ramp Carrier Opex Costs. A company's auditor is also required to evaluate and attest to the assessment mention previously. Compliance with Sarbanes-Oxley has its pros and cons. According to an anonymous article, the amount spent on first-year cost could well surpass $4. PCAOB Chief Promises "Rational Approach". Including, additional internal labor fees, software and outside guidance expenses, and a projected increase of thirty-five percent in audit fees ("Taking the Risk Out 2004, 2). Most of these corporations are now trading under the Pink Sheets to avoid internal control standards (Chavez 2004, 2). These examples will likely lead to a reduction in the need for extensive internal controls. These controls are costly, but there are benefits.
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