question archive The Sarbanes-Oxley Act of 2002 has been described as the most far-reaching legislation affecting business since the passage of the 1933 Securities Act
The Sarbanes-Oxley Act of 2002 has been described as the most far-reaching legislation affecting business since the passage of the 1933 Securities Act
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The Sarbanes-Oxley Act of 2002 has been described as the most far-reaching legislation affecting business since the passage of the 1933 Securities Act. What are the specific portions of the legislation that affect the external audit profession, and how do they affect the profession? How does the legislation affect the internal audit profession? What are some activities that are implied in the legislation, as well as activities that will likely emerge as companies implement various provisions of the act? Do you believe the legislation enhances the power and prestige of the audit profession, or alternatively, does it decrease both the power and prestige of the profession? Explain.
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Answer:
Sarbanes-Oxley Act (SOX), 2002
It is the United States federal law passed in response to a number of major corporate and accounting scandals which have resulted in decline of public trust, accounting and reporting practices.
Effect on Companies Auditing process-
1) More compliance verification needs to be done by the auditor. Hence, the cost and time involved in doing the audit, increases.
2) Purchase of compliance software or implementing recognized COSO framework that involves higher costs.
How this effect has been a positive one-
1) Greater corporate transparency is achieved.
2) Financial Statements and Foreclosures are made more reliable.
3) Overall increase in investor's wealth and investor's confidence.
4) More effective co-ordination with external auditors, resulting in higher quality of work.
