Question

1a.    How has Sarbanes-Oxley of 2002 affected FASB’s jurisdiction and independence?

1b.    Is it possible that the rules of internal controls in Sarbanes-Oxley of 2002 are making firms excessively risk-averse? If so, how?

Answer 1

1. Sarbanes-Oxley puts more of an emphasis upon auditing because the Auditing Standards board of the AICPA no longer sets auditing standards. Pressure will also be put on the public accounting firms and corporate officers to sign off on their financials. The beneficial changes affecting the FASB is that financing comes from assessments on public companies and accountants.

2.Yes, It is Possible.The understanding of internal controls required for CPAs to express an opinion on financial statements is not adequate for them to offer an opinion on the controls themselves. This means auditors will have to make changes to the audit process.

The Securities and Exchange Commission today voted to adopt rules concerning management's report on internal control over financial reporting and certification of disclosures in Exchange Act periodic reports. The Commission also voted to adopt new Rule 3a-8 under the Investment Company Act to provide a nonexclusive safe harbor from the definition of investment company for certain research and development companies.