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In: Accounting

Accounting fraud was a hot area and sensitive for the SEC in the early 2000s following...

Accounting fraud was a hot area and sensitive for the SEC in the early 2000s following a barrage of scandals at companies such as Enron, Worldcom and Parmalat to mention a few. In your opinion what is the significance of Sarbanes-Oxley Act of 2002 in combating accounting fraud in public companies?

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These scandals resulted in decline of Public trust in accounting & reporting practices. The Sarbanes-Oxley Act of 2002 covers issues such as auditor independence, corporate governance & enhanced financial disclosure.

The significance of Sarbanes-Oxley Act of 2001 in combating accounting fraud in public companies are as follows:-

1.) Creation of the Public Company Accounting oversight Board.

2.) Accelerated reporting of Insider trading.

3.) Enhanced criminal 7 civil penalties for violation of securities law.

4.) A requirement that Public companies evaluate & disclose the effectiveness of their internal controls, as they relate to financial reporting & that independent auditors for such companies"attest" to such disclosure.

5.) Document & Test the Internal control over financial reporting.

6.) Evaluate the operating effectiveness of significant control.

7.) Internal Control over Financial Reporting is meant to ensure the integrity of the financial statements & guard the assets of the company.

ekkarill92 answered 1 month ago
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