Review Of The Sarbanes-Oxley Act

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Individual Article Review Lily Cobian LAW/421 March 31, 2014 Ramon E. Ortiz-Velez Individual Article Review Introduction My article review is based on Sarbanes-Oxley and audit failure, a critical examination why the Sarbanes-Oxley Act of 2002 was established and why it is not a guarantee to prevent failure of audits. Sarbanes-Oxley Act talks about scandals of Enron which occurred in 2001 and even more appalling the company’s auditor, Arthur Anderson, found guilty of shredding company documents after finding out Enron Company was going to be audited. The exorbitant amounts of money auditors get paid to hide audit discrepancies was also beyond belief. The article went on to explain many companies hire relatives or friends to do their audits, resulting in fraud, money embezzlement, corruption and even the demise of companies. Resulting in the public losing faith in the accounting profession, the Sarbanes-Oxley Act passed in 2002 by congress was designed to restrict what company owners and auditors can and cannot do. From what I gathered in the article, ever since the implementation of the Sarbanes- Oxley Act there has been somewhat of an improvement but questions are still being asked as to why there are still issues that are not being targeted in hopes of preventing more audit failures. The article also talked about four common causes of audit failure: unintentional auditor mistakes, fraud, fatigue and auditor client relationships. The American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct clearly states an independent auditor because it produces a credible audit, however, when there is conflict of interest, the relation of a former employer, or a relative or even the fear of getting fire... ... middle of paper ... ...: 10 year imprisonment for mail wire and fraud, violators of financial statements not certified by a CEO and CFO face fines up to $5 million and imprisonment up to 20 years and tampering with documentation also carries a 20 year imprisonment sentence. Conclusion Making an unethical decision will not only bring repercussions to the auditor but also harm to the company the audit was done for. Due to the Sarbanes-Oxley Act resulted in added costs for audits and increased liability for unethical auditors, executives and Board members. The Sarbanes-Oxley also prevents foreign companies to do business in the United States and for those who choose to be non-compliant with Sarbanes-Oxley act the liability is steep. References: Tackett, J. (n.d.). Sarbanes-Oxley and audit failure A critical examination. Managerial Auditing Journal, Vol. 19 No.3, 2004. pp. 340-350. 1 2 3 4 5

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