Ethical And Legal Obligations of Financial Reporting

explanatory Essay

1134 words

The FASB, SEC, and PCAOB Ethical financial reporting is critical to ensure consumer confidence within an economy. Accounting entries record cash transactions in the form of financial reports. Financial reporting is used to interpret and analyze business activities for the purpose of investing and efficient management. Misrepresentations, whether intentional or accidental, can send the wrong signal to interested parties resulting in wrong decisions being made. Companies have an ethical and legal obligation to financial reporting. To ensure correct reporting is followed, several agencies are employed to regulate business. The Financial Accounting Standards Board, FASB, Securities and Exchange Commission, SEC and Public Company Accounting Oversight Board, PCAOB, are all agencies involved in promoting fair accounting principles for United States businesses. The most commonly known regulating agency is the SEC. It is the government ruling agency that oversees accounting for publicly traded companies in the United States. This agency was created in 1934 in response to the events which lead to the Great Depression. The mission statement of the SEC is "to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation" (U.S. Securities and Exchange Commission, 2006). Instead of implementing its own rules, the SEC has chosen the FASB to set high quality accounting standards to protect public interests (Wikipedia, 2006a). In response, the FASB has developed Generally Accepted Accounting Principles, GAAP, to regulate U.S. companies. As a non-profit, private organization, the FASB has no influence by government agencies or other groups. As business changes, the FASB updates GAAP to remain applicable to... ... middle of paper ... ...York: McGraw-Hill. Marshall, D., McManus, W. and Viele, D. (2004b). Financial Statements and Accounting Concepts/Principles. In M. Marcus (Ed.) Accounting: what the numbers mean (pp. 29-50). New York: McGraw-Hill. U.S. Securities and Exchange Commission. (2006). The Investor's Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation. Retrieved May 7, 2006 from http://www.sec.gov/about/whatwedo.shtml Wikipedia Contributors. (2006a). Public Company Accounting Oversight Board. Wikipedia, The Free Encyclopedia. Retrieved May 5, 2006 from http://en.wikipedia.org/wiki/PCAOB Wikipedia Contributors. (2006b). Financial Accounting Standards Board. Wikipedia, The Free Encyclopedia. Retrieved May 5, 2006 from http://en.wikipedia.org/wiki/FASB

In this essay, the author

Explains that financial reporting has implications which impact people's livelihood. fasb, sec, and pcaob have been created to increase the knowledge of ethical accounting.
Explains marshall, mcmanus, and viele, d. accounting present and past.
Explains m. marcus' accounting: what the numbers mean, new york: mcgraw-hill.

Explains that financial reporting has implications which impact people's livelihood. fasb, sec, and pcaob have been created to increase the knowledge of ethical accounting.
Explains marshall, mcmanus, and viele, d. accounting present and past.
Explains m. marcus' accounting: what the numbers mean, new york: mcgraw-hill.
Explains how the sec protects investors, maintains market integrity, and facilitates capital formation.
Explains that financial reporting is critical to ensure consumer confidence within an economy. the financial accounting standards board, securities and exchange commission, sec, and public company accounting oversight board regulate u.s. companies.
Explains accounting is based on the flow of money within an organization. accounting operates under the assumption that all entries are truthfully registered and ethical standards upheld.
Explains that the american institute of certified public accountants, aicpa, and ima have developed and published their own code of ethics. integrity, objectivity and independence are three elements sought in professional accountants.

Click here to unlock this and over one million essays

Continue Reading Check Writing Quality

Harness the Power of AI to Boost Your Grades!

Haven't found what you were looking for? Talk to me, I can help!

The Collapse Of Enron
explanatory essay
The Enron scandal resulted in other new compliance measures. Additionally, the Financial Accounting Standards Board (FASB) substantially raised its levels of ethical conduct. Moreover, company 's boards of directors became more independent, monitoring the audit companies and quickly replacing bad managers. These new measures are important mechanisms to spot and close the loopholes that companies have used, as a way to avoid
In this essay, the author
- Explains that after enron's plan of reorganization was approved by the u.s. bankruptcy court, the new board of directors changed its name to ecrc. the company paid its creditors more than 21.7 billion from 2004-2011.
- Explains that the enron scandal drew attention to accounting and corporate fraud, as its shareholders lost $74 billion in the four years leading up to its bankruptcy, and its employees lost billions in pension benefits.
- Analyzes how enron's collapse affected thousands of employees and shook wall street to its core. many wonder how such a powerful business disintegrated almost overnight.
- Explains that after enron's plan of reorganization was approved by the u.s. bankruptcy court, the new board of directors changed its name to ecrc. the company paid its creditors more than 21.7 billion from 2004-2011.
- Explains that the enron scandal drew attention to accounting and corporate fraud, as its shareholders lost $74 billion in the four years leading up to its bankruptcy, and its employees lost billions in pension benefits.
- Analyzes how enron's collapse affected thousands of employees and shook wall street to its core. many wonder how such a powerful business disintegrated almost overnight.
- Describes how enron was formed in 1985 following a merger between houston natural gas co. and omaha-based internorth inc.
- Explains how mark-to-market accounting helped enron write off losses without hurting the company's bottom line. andrew fastow, a rising star who was promoted to cfo in 1998, devised schemes to hide the losses.
- Explains how fastow and others at enron orchestrated a scheme to use off-balance-sheet special purpose vehicles to hide mountains of debt and toxic assets from investors and creditors.
- Explains that arthur andersen llp and its partner david b. duncan were major players in the enron scandal.
- Narrates how enron's stock fell to a 52-week low of $39.95 by the summer of 2001. the sec investigated the company and the spvs created by fastow. dynegy backed out of its offer.
- Explains how arthur andersen llp and enron corp. faced federal prosecution for obstructing justice for shredding the firm's financial documents.
- Explains how enron's collapse led to new regulations and legislation to promote the accuracy of financial reporting for publicly-held companies.
1789 words
Read More
Sarbanes Oxley Act
analytical essay
As noted earlier, the main purposes of the Sarbanes-Oxley Act was to restore investor confidence in publically traded companies in addition to preventing any large future fraud scandals from occurring as they had prior to the enactment of the Sarbanes-Oxley Act. Amongst the sources who praised the Sarbanes-Oxley was The Financial Executives International. In 2007, the Financial Executives International conducted a survey of 185 to research the effects of the enactment of the Sarbanes-Oxley Act. These studies concluded that 50.3% of the companies believed the accuracy of their financial reports has increased while 56% believed that these reports are more reliable. Amongst the 185 companies, 43.6% of them stated that they felt the Sarbanes-Oxley provisions helped reduce fraud and 69.1% of the companies stated that investor confidence has increased in their financial reports (financialexecutives.org). For example, the new provisions of the Sarbanes-Oxley led to the discovery of the fraudulent scandal involving Value Line. When a manager was required to sign the company’s Business Code of Ethics, he realized fraudulent activity and reported it. Without the Sarbanes-Oxley Act, this act o...
In this essay, the author
- Analyzes the negative effects of the sarbanes-oxley act on the new york stock exchange.
- Explains that the third title out of eleven of the sarbanes-oxley act is entitle corporate responsibility, which increases the responsibility of senior executives to ensure the corporate financial records are kept.
- Analyzes the negative effects of the sarbanes-oxley act on the new york stock exchange.
- Analyzes the negative effects of the sarbanes-oxley act on the new york stock exchange.
- Explains that the third title out of eleven of the sarbanes-oxley act is entitle corporate responsibility, which increases the responsibility of senior executives to ensure the corporate financial records are kept.
- Analyzes the negative effects of the sarbanes-oxley act on the new york stock exchange.
- Explains that the third title out of eleven of the sarbanes-oxley act is entitle corporate responsibility, which increases the responsibility of senior executives to ensure the corporate financial records are kept.
- Explains that the sarbanes-oxley act of 2002 was praised for its purpose of restoring investor confidence and preventing future fraud scandals.
- Explains that the sarbanes-oxley act of 2002 was praised for its purpose of restoring investor confidence and preventing future fraud scandals.
537 words
Read More
Sarbanes Oxley Act of 2004
explanatory essay
Sarbanes-Oxley consisted of 11 different titles or sections. Title I is Public Company Accounting Oversight Board. It created a five member panel known as the Public Company Accounting Oversight Board, overseen and appointed by the Securities and Exchange Commission (Sarbanes-Oxley). The Board is to consist of two CPAs and three people that are not CPAs, but the chairman must be a CPA. The Board is to provide oversight of auditing of public companies while establishing auditing, quality control, independence, ethical standards (Arens 32-33). Public accounting firms that work on audits must register with the Board and pay a fee. Title I also included new auditing rules. Auditors must now retain paper work for seven years, have a second partner review and approval of audit reports, evaluate whether internal controls accurately show transactions as well as sales of assets, and describe any weaknesses or noncompliant internal controls. Public accounting firms that issue auditing reports for more than 100 companies are to be inspected every year. Accounting firms that issue audit reports for less than 100 companies must be inspected very three years. The Board can discipline or sanction accounting firms for what it deems to be negligent conduct (Conference of State Bankers Online).
In this essay, the author
- Explains that the sarbanes-oxley act of 2002 was signed into law on july 30, 2002 by president bush.
- Explains that sarbanes-oxley included 11 different titles or sections. title i is public company accounting oversight board, overseen and appointed by the securities and exchange commission.
- Explains that the sarbanes-oxley act creates new rules that auditors must abide by in order to keep their objectivity and accuracy.
- Explains that the sarbanes-oxley act of 2002 was signed into law on july 30, 2002 by president bush.
- Explains that sarbanes-oxley included 11 different titles or sections. title i is public company accounting oversight board, overseen and appointed by the securities and exchange commission.
- Explains that the sarbanes-oxley act creates new rules that auditors must abide by in order to keep their objectivity and accuracy.
- Describes the requirements of the sarbanes-oxley act.
1715 words
Read More
The Detrimental Effects of the Sarbanes-Oxley Act
analytical essay
While fraud and financial scandal have occurred since before the inception of the United States, the late 1990s and early 2000s saw the problem become much more prevalent and wide spread than ever before. The overarching goal of providing assurance that financial statements accurately reflect a business was in place before SOX. What SOX changed was the way businesses must go about providing that assurance. Prior to SOX, while the Securities and Exchange Commission required the publication of annual audited financial statements, how a business and audit firm determined what measures they would take to achieve a necessary level of assurance was largely left up for them to de...
In this essay, the author
- Explains that while sox may have gone too far, congress was within their right to address the financial reporting issue. between 2001 and 2002, american investors lost over $300 billion as a result of various financial scandals.
- Analyzes how the burdensome costs of sox harm the bottom line of all companies, but the effects are disproportionately felt by the "small cap" companies.
- Explains that the sarbanes-oxley act of 2002 was passed in response to the widely publicized instances of fraud and corruption in large us companies.
- Explains that while sox may have gone too far, congress was within their right to address the financial reporting issue. between 2001 and 2002, american investors lost over $300 billion as a result of various financial scandals.
- Analyzes how the burdensome costs of sox harm the bottom line of all companies, but the effects are disproportionately felt by the "small cap" companies.
- Explains that the sarbanes-oxley act of 2002 was passed in response to the widely publicized instances of fraud and corruption in large us companies.
- Analyzes how sox increased auditor independence and increased demands for internal controls to combat the rash of financial reporting scandals.
- Argues that financial reporting and oversight regulations adhere to the law of diminishing returns, which means each additional measure yields fewer benefits.
- Analyzes how the sarbanes-oxley act and neoliberal governance of corporate america impacted the 99%.
1741 words
Read More
Sarbanes Oxley SOX - Effective Governance
opinion essay
The Sarbanes-Oxley Act of 2002, (SOX), was signed into law on July 30, 2002 by President Bush. Considered to be one of the most significant changes to securities law since the 1934 Securities Exchange Act, SOX calls for new procedures to fight accounting fraud and an array of new penalties to protect the employee from unethical behavior within the corporation. Currently, provisions of the Act are being enforced by the Securities and Exchange Commission (SEC), which has been responsible for setting the rules and parameters. The effects of the Act are far reach...
In this essay, the author
- Analyzes how the houston-based energy trading company, enron corporation, filed for bankruptcy protection on december 2, 2001. it was the largest bankruptcy case in u.s. history, dwarfing texaco's filing in 1987.
- Explains that the sarbanes-oxley act of 2002, which was signed into law by president bush, calls for new procedures to fight accounting fraud and an array of new penalties to protect the employee from unethical behavior.
- Summarizes the sarbanes-oxley act with j. carlton collins, cpa, president of asa research, llc.
- Analyzes how the houston-based energy trading company, enron corporation, filed for bankruptcy protection on december 2, 2001. it was the largest bankruptcy case in u.s. history, dwarfing texaco's filing in 1987.
- Explains that the sarbanes-oxley act of 2002, which was signed into law by president bush, calls for new procedures to fight accounting fraud and an array of new penalties to protect the employee from unethical behavior.
- Summarizes the sarbanes-oxley act with j. carlton collins, cpa, president of asa research, llc.
- Explains that it is now a felony with penalties of up to 10 years to willfully fail to maintain "all audit or review work papers" for at least five years.
- Explains that document destruction is considered a felony and can carry penalties of up to 20 years in prison.
- Explains that the statute of limitations for fraud discovery is extended to two years from the date of discovery and five years after the act.
- Explains that section 906 of the act requires each public company's chief executive officer and chief financial officer to certify periodic reports containing financial statements fully comply with securities laws.
- Explains that u.s. companies are required to have an internal audit function certified by external auditors.
- Explains that sarbanes-oxley holds ceos and directors accountable and punishable by up to $5 million and 20 years in prison for the crimes of the company.
- Explains that an employee concerns program must be established for the receipt and processing of concerns submitted by employees on a confidential or anonymous basis.
- Explains that cases of discrimination can turn on how a supervisor reacts to and handles an employee's situation.
- Opines that compliance is costly, but it's good for the company, its employees, and its investors. congress has pledged to protect workers by providing them with the ability to sue their employers.
- Summarizes sims, r., and brinkman, j. enron ethics (or: culture matter more than codes). journal of business ethics, 45(3), 243-255.
- Cites witherell, bill, corporate governance and responsibility; foundations of market integrity, the oecd observer, no. 234.
- Explains pittman, e.l., and navran, f.j. (2003). corporate ethics and sarbanes-oxley.
- Cites block, dennis j. & hoff johathan m., (2003) whistle-blower protection under the sarbanes-oxley act.
- Opines that the sarbanes-oxley act is a law and imposes severe penalties for violation of its requirements, including criminal prosecution.
- Analyzes how enron's greed and manipulation of accounting standards have raised questions about the values of those at the helm of organizations that rely on the public markets.
- Opines that companies must communicate the employee's responsibility to protect the interests of the organization, including the reporting of observed or suspected misconduct.
1889 words
Read More
The SEC
explanatory essay
The securities act of 1934 has empowered the SEC to do periodic evaluation of reports from companies that publicly trade their securities. The securities act also gives the SEC disciplinary powers as well. The SEC has authority over banks and financial institutions, and is allowed to make new rules that have to be followed by all institutions by law. For example if I owned a bank called Harris Community once the SEC creates a new rule or regulation it is my duty as a bank owner to ensure that my company as well as my employees are following the new guidelines or it can result in various discipline actions. The disciplinary actions could include anything from a simple fine, closure of my financial institute, or in some cases possible jail time. The SEC also oversees inspections of financial institutes which means they can conduct an inspection of the facility or after the inspection is conducted by another agency they have the right to review the results for any file play. If anything seems suspect they have the right to investigate, and if you refuse to cooperate with the investigations disciplinary measures will be used.
In this essay, the author
- Explains the difference between intentional tort and negligence.
- Explains that bank of america, n.a. member fdic.
- Explains how the sec protects investors, maintains market integrity, and facilitates capital formation.
- Explains the difference between intentional tort and negligence.
- Explains that bank of america, n.a. member fdic.
- Explains how the sec protects investors, maintains market integrity, and facilitates capital formation.
- Explains that the securities act of 1934 empowered the sec to do periodic evaluation of reports from companies that publicly trade their securities.
- Explains that tort interference with contractual relations protects the right to enjoy the benefits of legally binding agreements.
1316 words
Read More
Positive And Negative Effects Of The Sarbanes-Oxley Act
analytical essay
The Sarbanes-Oxley Act (SOX) was ratified on July 30, 2002 (Shaw and Terando,177). This act came after the financial crises during the early 2000’s. According to Bolton, following these corporate scandals in the early 2000’s, the government took a hard look at the different regulations on companies and how we can prevent what happened from happening again. Thus, came the Sarbanes-Oxley Act. SOX was created to decrease corporate fraud. This act especially looked at the role of accounting in corporations and thus also formed the Public Company Accounting Oversight Board (PCAOB) to supervise the accounting industry. The Sarbanes-Oxley Act also strengthened the independence of corporate boards (Bolton, 83). All of this regulation is imperative in the effect that SOX has today on corporations. The regulations that SOX requires and the cost of implementing them has a large impact on the managers’ and auditors’ incentives to follow SOX, thereby lessening the
In this essay, the author
- Explains that the sarbanes-oxley act (sox) was ratified on july 30, 2002, after the financial crises in the early 2000's.
- Explains that shaw and terando conducted research documenting the increased audit cost of sox, by focusing on large cross industry samples of corporations. they selected to test this effect on real estate investment firms (reits).
- Analyzes how shaw and ternado's research shows the direct negative impact of audit fees on corporations by the sarbanes-oxley act.
- Explains that the sarbanes-oxley act (sox) was ratified on july 30, 2002, after the financial crises in the early 2000's.
- Explains that shaw and terando conducted research documenting the increased audit cost of sox, by focusing on large cross industry samples of corporations. they selected to test this effect on real estate investment firms (reits).
- Analyzes how shaw and ternado's research shows the direct negative impact of audit fees on corporations by the sarbanes-oxley act.
- Explains that the sarbanes-oxley act has a negative impact on public enforcement mechanisms.
- Explains how rice, weber, and wu examined section 404 of the sarbanes-oxley act and the potential consequences of declining to state prevailing control flaws.
862 words
Read More
Gene One Analysis
opinion essay
In the eyes of Congress and the SEC, the new rules resulting from the Sarbanes-Oxley Act (SOA) were designed to restore investor confidence. Several regulations were designed to increase transparency of corporate information by providing a more accurate picture of a company's value and to restore confidence in the accuracy of financial information reported to the SEC. But from an investor's perspective, more information is not necessarily better information.
In this essay, the author
- Opines that an ipo can change the dynamics of a company. loss of confidentiality for organizations like gene one who depend on patents for success needs to be examined.
- Explains that the journal of agrobiotechnology management & economics, volume 2 //number 1 //article 5.
- Describes the challenges for companies and iros in the cpa journal online.
- Opines that an ipo can change the dynamics of a company. loss of confidentiality for organizations like gene one who depend on patents for success needs to be examined.
- Explains that the journal of agrobiotechnology management & economics, volume 2 //number 1 //article 5.
- Describes the challenges for companies and iros in the cpa journal online.
- Explains that gene one has developed a gene technology that eradicates disease in tomatoes and potatoes. to continue to grow 40 percent in each of the consecutive years, the organization will need an initial public offering (ipo).
- Analyzes how the sarbanes-oxley act (soa) was designed to restore investor confidence.
- Explains that the sarbanes-oxley 404 internal control requirements and expectations requires the company to design, maintain, and operate effective internal controls over financial reporting to ensure that publicly-reported financial statements are accurate and complete.
- Explains that biotech crops provide value and solve real problems for farmers. the united states has a science-based regulatory policy to accommodate the production and use of new biotechnology varieties.
- Explains that the biotech sector has reached significant market capitalization while staying attractive to investors with its growth potential.
- Opines that employees need to understand the new rules of a public company to decide if it is an organization where they would like to continue their career.
1711 words
Read More
HR Experiential Problem Solving
comparative essay
The Sarbanes-Oxley Act created new standards for the accountability of businesses and corporations and it includes penalties for acts of misconduct. The Act stipulates new financial reporting obligations, including the adherence to internal controls and procedures which are to certify the validity of their financial records. These accounting controls put into place were meant to reduce unethical/ illegal actions within an organization (Mathis & Jackson, 2011, p. 16).
In this essay, the author
- Explains that an ethics training program will associate the behavior of employees with the primary ethical standards desired by organizational leaders. awareness and communication in regards to moral principles in the workplace will foster openness and integrity.
- Opines that a solid code of ethics must touch upon universal standards that the organization supports; distinctive values which are distinctive to the day-to-day processes of an organization.
- Recommends training on ethical behavior for everyone in the organization, including executives, managers, and employees, to set a good example that specifies no employee is above the law.
- Explains that an ethics training program will associate the behavior of employees with the primary ethical standards desired by organizational leaders. awareness and communication in regards to moral principles in the workplace will foster openness and integrity.
- Opines that a solid code of ethics must touch upon universal standards that the organization supports; distinctive values which are distinctive to the day-to-day processes of an organization.
- Recommends training on ethical behavior for everyone in the organization, including executives, managers, and employees, to set a good example that specifies no employee is above the law.
- Proposes a confidential system for employees to report misconduct without fear of punishment or retaliation. this system will further dissuade ethical violations and provides the option of employees getting involved and remaining anonymous.
- Explains that a compliance strategy is to prevent criminal conduct, violation of government regulations, and self-interested behavior by employees and conflicts of interest.
- Explains that the sarbanes-oxley act created new standards for the accountability of businesses and corporations and it includes penalties for acts of misconduct.
- Explains the importance of an integrity strategy, which communicates the organization's standards, policies, and practices.
- Explains the complete guide to ethics management: an ethics toolkit for managers.
888 words
Read More
Appliying The International Financial Reporting System in The US
explanatory essay
The purpose of the SEC report compiled by SEC staff is to consider the application of the International Financial Reporting System and its standards in the United States. Currently the United States utilizes the U.S. GAAP accounting standards. The difference between U.S. GAAP and IFRS accounting standards the U.S. GAAP standards are rules based, while the IFRS standards are principles-based. This means that U.S. GAAP standards provide clarity in application and IFRS standards which are clearly defined allow users the opportunity to interpret the principles and determine the best way to account for a given transaction (Which is better, 2011). The following is a summary of key points from the SEC Report.
In this essay, the author
- Explains that the sec report considers the application of the international financial reporting system and its standards in the united states.
- Explains that u.s. gaap standards are tailored to the needs of the business, reporting, and regulatory environment, providing standards for the different industries. ifrs standards lack the guidance that investors and preparers need.
- Explains that u.s. gaap rules permit utility companies to accrue assets or liabilities based on future cash inflows or out flows permitted or required by the utility’s regulator. the ifrs does not currently have a principle in place for rate-regulated activities.
- Explains that the sec report considers the application of the international financial reporting system and its standards in the united states.
- Explains that u.s. gaap standards are tailored to the needs of the business, reporting, and regulatory environment, providing standards for the different industries. ifrs standards lack the guidance that investors and preparers need.
- Explains that u.s. gaap rules permit utility companies to accrue assets or liabilities based on future cash inflows or out flows permitted or required by the utility’s regulator. the ifrs does not currently have a principle in place for rate-regulated activities.
- Explains that u.s. gaap and ifrs differ in regards to accounting in the oil and gas industries.
- Explains that investment companies utilizing ifrs standards use the same accounting standards followed by other companies in different industries, whereas u.s. gaap rules contain specific rules and guidance.
- Explains that under u.s. gaap rules, brokers measure investments at fair value, with changes recorded in earnings each reporting period. the ifrs does not provide specific guidance to broker-dealers.
- Opines that the ifrs principles provide companies with more flexibility, but they fail to provide the appropriate amount of guidance.
- Cites the u.s. securities and exchange commission's office of the chief accountant.
- Explains that the sec report analyzed financial statements prepared under ifrs standards to determine whether or not the flexibility in the principles allows for accurate and consistent financial reporting.
- Cites benjamin, romeo, and blomberg's 'international financial reporting standards for us investment companies'. mcenroe, e., & sullivan, m.
1247 words
Read More
Private And Public Accounting: The Aspects Of Private Company Financial Reporting
explanatory essay
Private and public accounting has long been discussed and disputed in regards to financial reporting. Since the Financial Accounting Standards Board (FASB) was created in 1973, accountants have called for different accounting regulations for private and public accounting sectors, as private companies do not have the resources to meet the complex requirements of public companies. Private companies currently are not required by law to issue annual or quarterly financial statements (James, 2012). Private companies do, however, have the option to apply the U.S. Generally Accepted Accounting Principles (GAAP), cash basis, or accrual accounting to their financial statements (James, 2012).
In this essay, the author
- Explains the purpose of the research paper, which is to determine the history behind private accounting, compared to public accounting. the paper reviews the pcc's different accomplishments in regards to financial reporting for private companies.
- Explains that private companies have been requesting different financial accounting standards to meet the specific needs of their financial statement consumers. the faf, aicpa, and nasba have joined together to create new reporting requirements for privately owned companies.
- Explains that the financial accounting foundation board of trustees created the pcc to assist in creating new standards and to help improve the existing accounting standards for private companies.
- Explains the purpose of the research paper, which is to determine the history behind private accounting, compared to public accounting. the paper reviews the pcc's different accomplishments in regards to financial reporting for private companies.
- Explains that private companies have been requesting different financial accounting standards to meet the specific needs of their financial statement consumers. the faf, aicpa, and nasba have joined together to create new reporting requirements for privately owned companies.
- Explains that the financial accounting foundation board of trustees created the pcc to assist in creating new standards and to help improve the existing accounting standards for private companies.
- Explains that the pcc collected information from private companies and worked together to develop some relief for some of the required financial reporting.
- Explains that the accounting standards developed by gaap were costly and complex for private companies. the pcc is actively working to create additional amendments to the accounting standards.
- Explains that private and public accounting has long been discussed and disputed in regards to financial reporting, since the financial accounting standards board (fasb) was created in 1973.
- Explains how buchholz and pilato researched the different accounting standards that were developed over the years. james (2012) noted how complex and costly it was for privately held companies to report under the current gaap regulations.
1240 words
Read More
Accounting Fraud, the Investor and the Sarbanes Oxley Act
explanatory essay
Throughout the past several years major corporate scandals have rocked the economy and hurt investor confidence. The largest bankruptcies in history have resulted from greedy executives that “cook the books” to gain the numbers they want. These scandals typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of assets or underreporting of liabilities, sometimes with the cooperation of officials in other corporations (Medura 1-3). In response to the increasing number of scandals the US government amended the Sarbanes Oxley act of 2002 to mitigate these problems. Sarbanes Oxley has extensive regulations that hold the CEO and top executives responsible for the numbers they report but problems still occur. To ensure proper accounting standards have been used Sarbanes Oxley also requires that public companies be audited by accounting firms (Livingstone). The problem is that the accounting firms are also public companies that also have to look after their bottom line while still remaining objective with the corporations they audit. When an accounting firm is hired the company that hired them has the power in the relationship. When the company has the power they can bully the firm into doing what they tell them to do. The accounting firm then loses its objectivity and independence making their job ineffective and not accomplishing their goal of honest accounting (Gerard). Their have been 379 convictions of fraud to date, and 3 to 6 new cases opening per month. The problem has clearly not been solved (Ulinski).
In this essay, the author
- Explains that the us government amended the sarbanes oxley act of 2002 to mitigate these problems.
- Explains that when a large company commits accounting fraud and is caught, the implications from their actions are very far reaching.
- Opines that accounting fraud is not directly affected by the bankruptcies. millions of americans who were heavily invested through their 401(k) retirement plans had to postpone retirement and rethink their investment strategy.
- Explains that the us government amended the sarbanes oxley act of 2002 to mitigate these problems.
- Explains that when a large company commits accounting fraud and is caught, the implications from their actions are very far reaching.
- Opines that accounting fraud is not directly affected by the bankruptcies. millions of americans who were heavily invested through their 401(k) retirement plans had to postpone retirement and rethink their investment strategy.
- Explains how executives can "cook the books" to make a company look more profitable and stable than it actually is.
- Explains that the sarbanes-oxley act of 2002 was enacted to protect investors by fighting corporate crime and improving corporate governance.
- Explains that the board of directors in a company must have at least five financially literate members appointed for five-year terms. the audit lead or coordinator partner and reviewing partner must rotate every five years.
- Explains that the act protects whistleblowers who come forth with incriminating information about activities within their company, especially with the increasing prosecution following sarbanes-oxley.
- Explains that sarbanes-oxley provides certain blackout periods for stock trading in which officers and directors cannot purchase or sell stock. profits resulting from sales in violation of this are recoverable by the issuer.
- Explains the sec's control over sarbanes-oxley, including the ability to restrict people from serving on the board of directors if they have a securities fraud issue in their background.
- Opines that the most challenging area for companies is the saving of all communications and the creation of transparent and auditable systems for recording transactions.
- Explains that sarbanes-oxley is intended to give the investor back some measure of confidence with the internal accounting practices of the organization.
- Explains that since the act has been put into place, nothing related to financial reporting is taken for granted. most companies have implemented better corporate governance procedures. audit committees and boards of directors are now more engaged in their responsibilities.
- Opines that companies are more often identifying and modifying control shortages before misstatements happen on their financial statements.
- Explains that companies will be forced to put into place systems and processes to track and save correspondence. they will often need to start new or serious changes on their it accounting systems to meet the standards for sarbanes oxley.
- Opines that training employees on new systems, processes, and procedures is expensive and should be larger up front. they can use their trained employees to train new employees in future years.
- Explains that applying sarbanes-oxley compliance in an organization will take a significant amount of time for involved employees. documenting processes will only need to be modified down the road.
- Opines that organizations must be prepared for the controls that will be given up to their systems when following sarbanes oxley.
- Opines that companies need to show due diligence to protect themselves from accounting issues. the higher the compliance checks and balances are and the more secure processes are in place, the better chance the company has to defend itself.
- Opines that sarbanes-oxley is only effective if the general idea of the organization leans toward ethical business practices.
- Opines that whistle blower protection should be strong and understood in sarbanes-oxley to help promote ethical standards. this will allow employees to discuss issues without fear of retribution.
- Opines that sarbanes-oxley is not an option for publicly traded companies. the company must decide whether to implement the minimum to get by with compliance or do you put in place a strong system to fully protect and improve current accounting practices.
- Opines that sarbanes oxley compliance is not an overnight transition. companies need to take a look at the needs of their organization, their current structure, and put in place what will work best for their investors, employees and company.
- Describes the contents of the book, "ethics in auditing".
1981 words
Read More