How The Sarbanes-Oxley Act Will Impact The Audit Function

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Before the Enron-Arthur Anderson scandal, auditors were generally viewed as independent and trustworthy professionals. They protected the interests of the individual investor by ensuring that corporations presented financial statements that accurately reflected the financial results of operations. The auditor was trusted to present the facts as he saw it, regardless of the implications. When events such as the academy awards used the services of a CPA, it was done not because the counting of ballots was a technically difficult task, but because people believed CPA's could be trusted. The recent problems encountered by many of the nations top accounting firms "has taken something important from all accountants: the assurance that practicing or teaching others to practice accounting is an honorable way to spend one's life (Williams 2003)."

The traditional audit involved many time consuming practices that increased the likelihood of detecting fraud, such as site visits to multiple locations, observation of assets, and random sampling of non-material levels. Also, the audit was closely supervised by senior partners who thought their firm's integrity was at stake at every engagement. However, as the revenues from consulting services grew, the audit function became merely a part of a package which accounting firms offered in conjunction with the more lucrative consulting services. As the financial rewards from audits diminished so did the scope and depth of procedures performed. Audits, in recent years, have been reduced to computer based test controls and statistical modeling. Another development is that junior accountants are often assigned the crucial oversight roles that were traditionally filled by senior partners who are now ...

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...ompany's books and records do not reflect the company's performance.

References

Bloch, G. (2003, April). Sarbanes-Oxley's effects on internal controls for revenue. The CPA Journal, 73(4), 68.

Colson, R. (2003, April). Maintaining public credibility: An interview with Charles D. Niemeier. The CPA Journal, 73(4), 18.

Frieswick, K. (2003, July). How audits must change. CFO, 19(9), 42-44, 46-48, 50.

McConnell Jr., D. K., Banks, G. Y. (2003, September). How Sarbanes-Oxley will change the audit process. Journal of Accountancy, 196(3), 48-55.

Nyberg, A. (2003, September). The true cost of Sarbanes-Oxley compliance. CFO, 19(11), 57.

Williams, P. (2003, April). Association for integrity in accounting enters the discussion of accounting reforms. The CPA Journal, 73(4), 14.

Wolosky, H. (2003, July). Living with Sarbanes-Oxley. The Practical Accountant, 36(7), 4.

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