“How the Sarbanes-Oxley Act Relates to Internal Control”
WRITING ASSIGNMENT
Writing Assignment
“How The Sarbanes-Oxley Act Relates to Internal Control”
Accounting 1
November 2011
Writing Assignment-How The Sarbanes-Oxley Act Relates to Internal Control. In attempting to explain the Sarbanes-Oxley Act (SOX) and how it relates to the accounting concepts of control, some brief information is necessary to provide background on why it was enacted in 2002. Questions answered are why SOX was enacted, who passed this Act and why was it needed, what is internal control, how SOX Provisions and Requirements relate to internal control where is it applicable in the accounting process?
. Why SOX was enacted in 2002. Many laws and governing organizations have been passed and set up in the field of accounting, as financial information has to be relevant, reliable and comparable with generally accepted accounting principles or GAAP. According to authors of Accounting: Chapters 1 – 8, Custom Edition 2010, there are “two laws requiring companies to have internal controls that stress the importance and the need for internal controls (are) The Foreign Corrupt Practices Act and The Sarbanes-Oxley Act of 2002” (Horngren, Harrison & Oliver, 2010, p.5). The SOX provides for the “shields of internal control” to be in place to prevent theft, waste and inefficiency (Horngren et Al, 2010, p. 380). This is to insure that employees and corporations can do business securely and ethically (Horngren et Al, 2010, 380). The purpose of the act is to restore public confidence and trust in the financial statements of companies and is applicable to companies whose stock is traded on public exchanges. Also known as the Public Company Accounting Reform and Investor Protection Act of 2002, and simply as SOX, Sarbanes-Oxley.
Who passed this Act and Why Was it Needed The need was determined by the US government after scandalous events happened with Enron, Corp reporting misleading financial information as well as WorldCom and
Writing Assignment
“How The Sarbanes-Oxley Act Relates to Internal Control”
Accounting 1
November 2011
Writing Assignment-How The Sarbanes-Oxley Act Relates to Internal Control. In attempting to explain the Sarbanes-Oxley Act (SOX) and how it relates to the accounting concepts of control, some brief information is necessary to provide background on why it was enacted in 2002. Questions answered are why SOX was enacted, who passed this Act and why was it needed, what is internal control, how SOX Provisions and Requirements relate to internal control where is it applicable in the accounting process?
. Why SOX was enacted in 2002. Many laws and governing organizations have been passed and set up in the field of accounting, as financial information has to be relevant, reliable and comparable with generally accepted accounting principles or GAAP. According to authors of Accounting: Chapters 1 – 8, Custom Edition 2010, there are “two laws requiring companies to have internal controls that stress the importance and the need for internal controls (are) The Foreign Corrupt Practices Act and The Sarbanes-Oxley Act of 2002” (Horngren, Harrison & Oliver, 2010, p.5). The SOX provides for the “shields of internal control” to be in place to prevent theft, waste and inefficiency (Horngren et Al, 2010, p. 380). This is to insure that employees and corporations can do business securely and ethically (Horngren et Al, 2010, 380). The purpose of the act is to restore public confidence and trust in the financial statements of companies and is applicable to companies whose stock is traded on public exchanges. Also known as the Public Company Accounting Reform and Investor Protection Act of 2002, and simply as SOX, Sarbanes-Oxley.
Who passed this Act and Why Was it Needed The need was determined by the US government after scandalous events happened with Enron, Corp reporting misleading financial information as well as WorldCom and
References: Horngren, C.T., Harrison, W.T., & Oliver, M. S. (2009). Accounting: Chapters 1 – 8: 2010 Custom edition (8th ed.). Upper Saddle River, NJ: Pearson (Pages 5, 380, 381). Horngren, C.T., Harrison, W.T., & Oliver, M. S. (2009) Lecture Notes, Pearson Learning Solutions. Accessed December 1, 2010. http://media.pearsoncmg.com/pcp/pls/course_connect/business/accounting_1/lesson_08/default.htm Vorhies, James Brady (2005) Journal of Accounting, The new importance of materiality: CPAs can use this familiar concept to identify key control exceptions. Accessed November 29, 2010 http://www.allbusiness.com/accounting-reporting/auditing/435687-1.html