II. First Year of SOX Compliance
A. Success
There are many aspects that contribute to Trinity Industries Sarbones-Oxley (SOX) compliance in their first year. It was described by the Vice President and Chief Audit executive as a "likely candidate for a material weakness" within the first year of SOX compliance; however, no material weaknesses were discovered. Trinity Industries was a very successful business, who continuously strived to improve, but when it came to compliance, they faced the same issues that many other businesses had as well. Trinity industries was thought to be a likely candidate for material weakeness due to their disparate nature of it's accounting systems. Trinity Industries, had issues with the process and control
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There are 22 business units that were investigated and they thoroughly reviewed all reporting processes.Trinity Industries, hired external consultations to create and put a plan in place for a future project plan for converting their systems over to one consolidated system. It was also suggested that training should be provided to all employees, monitor controls and close any gaps. SOX, helped them identify the areas of controls and reporting weakness that needed to be focused on and corrected. After thourough review of these areas, Trinity industries consolidated their various reporting systems into one centeralized system they developed the accounting service center. The accounting service center offers provided centralized, outsourced services for routine, organization-wide transaction processing" (Schultze, …show more content…
It is understood that management will be held for meeting the requirements for the compliance. PCAOB, Standard No. 5 sets requirements pertaining to the selection of controls that need to be testedand the nature, timing and extent of test of controls in an audit of internal control over fiananical reporting. (PCAOB) There are eleven sections covered under SOX complainance, one of the most important areas are found under Section 302, internal certification of controls; Section 302 was created to make the company respibsible for having internal controls procedures set and to make sure that finanical statements are accurate and another important section is Section 404, the assessment of internal
Trinity installed the Oracle system (EDP) which centralized their financial data of all the BUs in one system to have reliability and accountability of their financial statements. This system combined four ledgers in one system and save Trinity $.5 million annually in SOX compliance expense. This system improved their reporting process, timely closing of books, and availability of financial information. This systems left little room for misrepresentation of their financial statements which satisfied some of the SOX requirements.
The specific obligations in this case would include monitor corporate governance activities and compliance with organization policies, and assess audit committee effectiveness and compliance with regulations
The Sarbanes-Oxley Act of 2002 (SOX) was named after Senator Paul Sarbanes and Michael Oxley. The Act has 11 titles and there are about six areas that are considered very important. (Sox, 2006) The Sarbanes-Oxley Act of 2002 made publicly traded United States companies create internal controls. The SOX act is mandatory, all companies must comply. These controls maybe costly, but they have indentified areas within companies that need to be protected. It also showed some companies areas that had unnecessary repeated practices. It has given investors a sense of confidence in companies that have complied with the SOX act.
The audit committee must certify that the company’s auditors are independent. The audit committee must approve all professional services provided to the company by its independent auditors and ensure that auditors do not provide to the company any of the specifically prohibited services identified by SOX, such as bookkeeping services. The audit committee must receive and analyze key items of information from the independent auditors. These items of information include auditors’ analysis of critical accounting policies adopted by the
It has been a decade since the Sarbanes-Oxley Act became in effect. Obviously, the SOX Act which aimed at increasing the confidence in the US capital market really has had a profound influence on public companies and public accounting firms. However, after Enron scandal which triggered the issue of SOX Act, public company lawsuits due to fraud still emerged one after another. As such, the efficacy of the 11-year-old Act has continually been questioned by professionals and public. In addition, the controversy about the cost and benefit of Sarbanes-Oxley Act has never stopped.
Consistent accounting and financial frauds in the U.S. alerted the SEC to the imperative need for policy and corporate governance changes. The Sarbanes-Oxley Act in 2002 was enacted to encourage financial disclosures, enhance corporate responsibility, and combat fraudulent behaviour. This Act also helped create the PCAOB, which oversees the auditing practice (Stanwick & Stanwick 2009).
Without such controls it would be difficult for most business organizations like Trinity Industries with numerous locations, operations, and processes to prepare timely and accurate financial reports. Since no control system can guarantee that financial statements will not contain material errors or misstatements, an effective internal control system can reduce the risk of misstatements. Internal Controls should therefore be designed and implemented with the risk of fraud in mind and tailored to the circumstances of the company. In the case of Trinity part of the SOX project was to identify key process, by interviewing organizational members to understand how the processes and controls worked within the company, and who was responsible. With guidance from PCAOB AS No.5 they identified the gaps of controls and took steps to close them.
The Sarbanes-Oxley Act at 10: Enhancing the reliability of financial reporting and audit quality (2012). Ernst & Young. Retrieved November 9, 2013 http://www.ey.com/publication/vwluassetsdld/soxat10_jj0003_july2012/$file/soxat10_jj0003_july2012.pdf?OpenElement
Throughout the past several years major corporate scandals have rocked the economy and hurt investor confidence. The largest bankruptcies in history have resulted from greedy executives that “cook the books” to gain the numbers they want. These scandals typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of assets or underreporting of liabilities, sometimes with the cooperation of officials in other corporations (Medura 1-3). In response to the increasing number of scandals the US government amended the Sarbanes Oxley act of 2002 to mitigate these problems. Sarbanes Oxley has extensive regulations that hold the CEO and top executives responsible for the numbers they report but problems still occur. To ensure proper accounting standards have been used Sarbanes Oxley also requires that public companies be audited by accounting firms (Livingstone). The problem is that the accounting firms are also public companies that also have to look after their bottom line while still remaining objective with the corporations they audit. When an accounting firm is hired the company that hired them has the power in the relationship. When the company has the power they can bully the firm into doing what they tell them to do. The accounting firm then loses its objectivity and independence making their job ineffective and not accomplishing their goal of honest accounting (Gerard). Their have been 379 convictions of fraud to date, and 3 to 6 new cases opening per month. The problem has clearly not been solved (Ulinski).
This paper will show how the facility will continue to stay abreast of the Occupational Safety & Health Administration (OSHA) standards. The paper will also take a look at the activities and the frequency of training and audits that the hospital will conduct throughout the year. This paper will address the possibility of the fines the hospital has received and what causes the fines. The OSHA is an organization that provides a safe work environment for all staff members.
...he Sarbanes-Oxley act, which began with companies like Rite Aid abusing the deregulated system, are (1) the required attestation by the CEO and the CFO; and (2) better internal control mandates, procedures and documentation requirements.
This shows how a lack of transparency in reporting of financial statements leads to the destruction of a company. This all happened under the watchful eye of an auditor, Arthur Andersen. After this scandal, the Sarbanes-Oxley Act was changed to keep into account the role of the auditors and how they can help in preventing such
The PCAOB has the authorization to provide rules governing the following areas; ethics, independence, and quality control for any registered accounting firm...
The Resources Group, 2012, Components Of A Computerized Accounting System. Available at: . [Accessed 12 November 2013]
Overall, the company is having ineffective controls regarding different departments and in the whole organization. An effective internal audit department should be established within the organization which should test the effectiveness of these controls on regular basis and make it sure that all controls are working effectively and efficiently with the different departments of the organization. Also the Internal auditor should implement the most effective processes and measures to prevent and detect the fraud, corruption and non compliance with the laws and regulations in the organization. Establishment of internal audit committee would be helpful in this regard which comprises of executive and non executive directors.