Sarbanes Oxley Act SOX

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After major corporate and accounting scandals like those that affected Tyco, Worldcom and Enron the Federal government passed a law known as the Sarbanes-Oxley Act of 2002 also known as the Public Company Accounting Reform and Investor Protection Act. This law was passed in hopes of thwarting illegal and misleading acts by financial reporters and putting a stop to the decline of public trust in accounting and reporting practices. Two important topics covered in Sarbanes-Oxley are auditor independence and the reporting and assessment of internal controls under section 404. Sarbanes-Oxley contains eleven titles and covers a wide range of topics from the implementation of new compliance requirements to the criminal penalties of any violations of the rulings. One very important aspect touched upon in Sarbanes-Oxley is auditor independence. Auditor independence and the part an auditor plays in corporate financial reporting in the wake of all the corporate scandals have become extremely important. It has become increasingly important in the training and professional ethics of an auditor. The objective of auditor independence is to have the auditor “be unbiased and impartial with respect to the financial statements and other information they audit”0. There are three aspects of practical auditor independence, programming independence, investigative independence and reporting independence. Reporting independence is extremely important because it is the main objective of auditor’s independence, the prevention of any client influence on the outcome of what is to be reported. It is crucial for an auditor to not feel any need to be loyal or favorable in their reporting towards the client. The auditor’s obligation is to repor... ... middle of paper ... ... favorable way by eliminating the possibility of an auditor to reap benefits from the manner in which they report on an audit client's financial statements. While section 404 takes an internal approach to ensure that management is doing what it can to establish means of effective internal controls by having to report on them. Works cited Maintaining Auditor Independence The Edge, November 11, 2002 http://www.pwc.com/extweb/indissue.nsf/DocID/607E8C1B96B9DC31CA256C6F002C846F#4 Sarbanes-Oxley Act of 2002 http://fl1.findlaw.com/news.findlaw.com/hdocs/docs/gwbush/sarbanesoxley072302.pdf http://www.Sarbanes-oxley.com Ramos, Michael Section 404 compliance in the annual report October 2004 http://www.aicpa.org/pubs/jofa/oct2004/ramos.htm Robertson, Jack C, and Louwers, Timothy J. Auditing & Assurance Services, 10th ed. New York: McGraw-Hill, 2002.

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