Question

Assuming that you are the controller for a publicly traded company, your CFO has asked you to prepare a presentation for the accounting department personnel and the public auditors about the importance of the SOX Act and the requirements and responsibilities that the Act establishes for the auditors in charge of an annual audit. After the presentation, the CFO wants all accounting personnel and public accounting auditors to understand the regulations and guidelines established by the SOX Act and also for you to provide recommendations as to how the Act's principles can be improved to make American corporations more ethically responsible.

Describe your assessment of the responsibilities established for accounting personnel—including protection for whistle-blowers—and for the public accounting auditors.

Answer 1

Public Company Accounting Oversight Board

• Section of 101 of the SOX gives the Public Company Accounting Oversight Board, wide ranging powers. It might set registering requirements, set standards related to auditing, quality control, ethics, independence, and other standards and conduct inspections of CPA firms.

Section 101 SOX Gives Powers To:

• Carry out investigations; Commence disciplinary proceedings; Impose punishments on public accounting firms. It can impose fines up to $2 million on CPA firms, take actions to improve standards of CPAs and conduct operations in any part of the US.

PCAOB Has Powers To:

• Overseeing, inspecting, and regulating CPA firms when they audit public companies. It sets standards for independence of auditors, corporate governance, internal control assessment, and increased financial disclosure. It sets limits on the auditing firms to provide non-audit services to their audit customers. The board may require audit firms to provide testimony or documents. On refusal the person may be suspended or debarred.