Team Reflection Summary
In recent years there have been many highly publicized financial accounting scandals. Enron, WorldCom, and AIG are a few of the well- known corporate companies that have been involved in financial reporting scandals. United Sates regulators and lawmakers made known their concerns of mistrust in corporate accounting, because of unethical financial reporting. In 2002 Congress formed the Sarbanes-Oxley Act to certify that publically traded companies were reporting their finances honestly. The Sarbanes-Oxley Act specifies the requirements for financial reporting for public Corporations.
The Securities and Exchange Commission oversees the financial reports from these companies. The Sarbanes-Oxley Act calls for all publicly traded corporations to follow firm requirements for financial accounting, and reporting. Although there are many differences between the accounting reporting standards of the United States and each country, the global business world requires a unique consideration. Other countries do not have such high levels of accounting criteria, and when the United States deals with them, extra caution is needed.
The Sarbanes-Oxley Act created problems in the business environment during the first year, auditing cost rose to staggering proportions, and many public firms went private as a way of avoiding the cost of complying with this law. The SOX Act was intended to improve corporate governance an increase transparency of financial audits. The act was to restore public confidence in Corporate America, change the way accountants did business, set standards, and enforce stricter criminal penalties.
In the role of internal control in complying with (SOX) federal regulations have been revised to constrict responsibility dealing directly with directors, officers, and auditors. The revision obligates companies that are publicly traded to incorporate three precise reports within their annual financial reports to include the following: 1. Statement that outlines the management’s responsibilities on generating and reinforcing acceptable internal controls, arrangements, and techniques. 2. Evaluations of management’s internal controls arrangements and techniques efficiency in relations to the company’s end of the current fiscal year.
3. Requires verification by an auditor non-affiliated with the company, on the efficiency of the internal controls arrangements, and techniques of financial reports. It is essential that the reports are in accordance to the standards founded by the Public Accounting Company Oversight Board. In conclusion, effective financial reporting depends on moral and ethical behavior. It is of moral obligation to adhere to written codes of ethics. With this in mind, lawmakers can depend on the (SOX) Act to certify the accuracy of financial reporting, and ensure that fraud will not occur. ?