In: Accounting
As the controller of a medium-sized financial services company, you take pride in the accounting and internal control systems you have developed for the company. You and your staff have kept up with changes in the accounting industry and been diligent in updating the systems to meet new accounting standards. Your outside auditor, which has been reviewing the company’s books for 15 years, routinely complimented you on your thorough procedures. The passage of the Sarbanes-Oxley Act, with its emphasis on testing internal control systems, initiated several changes. You have studied the law and made adjustments to ensure you comply with the regulations, even though it has created additional work. Your auditors, however, have chosen to interpret SOX very aggressively—too much so, in your opinion. The auditors have recommended that you make costly improvements to your systems and also enlarged the scope of the audit process, raising their fees. When you question the partner in charge, he explains that the complexity of the law means that it is open to interpretation and it is better to err on the side of caution than risk noncompliance. You are not pleased with this answer, as you believe that your company is in compliance with SOX, and consider changing auditors. Using a web search tool, locate articles about this topic and then write responses to the following questions. Be sure to support your arguments and cite your sources.
Ethical Dilemma: Should you change auditors because your current one is too stringent in applying the Sarbanes-Oxley Act? What other steps could you take to resolve this situation?
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The Act 2002 of Sarbanes-Oxley is a statutory statute that lays out extensive examinations for public companies and financial regulations. The regulation was developed by the lawyers to insure that creditors, employees and the public were safe against accounting irregularities and financial fraud. U.S. legislation aimed at shielding investors against dishonest accounting practices by company is the Sarbanes-Oxley Act of 2002 which is also commonly referred to as SOX or Sarbox. It also discusses concerns such as the integrity of auditors, corporate governance, the evaluation of internal controls and enhanced financial knowledge.The act deeply affected corporate policy in the United States. The Sarbanes-Oxley Act mandates public agencies to establish oversight boards, perform internal management examinations, institutional responsibility and improve transparency of executives and managers. As per the case, the auditor should not be removed, since he gave importance to compliance more than the cost. SOX ensures that everyone who is associated with the company is safe and are against the financial fraud. Certain steps should be taken by the company to reduce the cost. The company can opt for the following options: