Sarbanes Oxley (Essay Sample)

Sarbanes Oxley
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Abstract
The Sarbanes-Oxley Act of 2002 is a legislation recommended by the United States Congress to protect the shareholders and the general public from errors of accounting and fraudulent practices. Its main aim is to enhance the accuracy of the corporate disclosures. This is an Act, signed into law in July 2002.The Sarbanes-Oxley Act has affected many private organizations by the indirect and long-term effects of the reforms. The bill has led to the reduction of the America international competitive edge against foreign financial providers. It is considered so since it has led to the introduction of a complicated regulatory surrounding into the United States financial market. The act applies to the registered public accounting organizations. It does not make an extra step of regulating the small and medium size organizations that do not perform audits of public corporations.
The Sarbanes-Oxley Act has increased the independence of the outside auditors who examine the precision of corporate financial statements. In addition to, the increased supervisory role of the board of directors in a firm. The act prevents the outside independent audit firms from performing certain roles for the private firms. The roles include book keeping, actuarial services, management function, internal audit outsourcing services and investment banking services. According to the Act, the auditors are mandated to report on the management assessment of corporation’s internal manipulation. The internal control systems of the private firms are delegated to be controlled by the auditors. According to the Sarbanes Act the CEO, CFO and chief accounting officer are not supposed to be employed by the external auditors prior the year of audit. Hence, limiting the potential of the corporations to hire employees from the outside audit firms. On the other hand, the law demands the auditors to make the information available to the audit committee on financial practices at the right time. In case, a disagreement occurs between the auditor and the management the audit committee should know about it.
The Sarbanes-Oxley Act has made it difficult for the private firm to get the required security in case of bankruptcy as it used to happen routinely. The outside independent audit firms are entitled to provide the intended opinion on the effectiveness of the internal controls. The auditors also have to employ more experienced personnel to assist in the documentation of the key exposures of the internal operation. However, the law has led to the auditors maneuvering high profits from the organizations. The work done by the auditors is charged on an hourly rate. Thus, giving the audit...