Cox Research Paper

Submitted By michaelcox18
Words: 2490
Pages: 10

The Sarbanes-Oxley Act of 2002 and the PCAOB
Michael Cox
Liberty University
Abstract
As a result of massive accounting scandals in the United States between 2001 and 2002 involving notorious companies, such as Enron, Worldcom, Tyco, and various other recognized entities, President George W. Bush signed into legislation during 2002 the Sarbanes-Oxley Act of 2002. This historic piece of legislation has had a profound effect on the accounting profession. As a result of the act, the PCAOB was created. Since its inception, the PCAOB has created some of the most importing accounting standards that are used every day by auditors of public companies. This paper takes a look at the Sarbanes-Oxley Act of 2002 and its effect on internal controls and small businesses. Also, I will discuss the purpose and specific pronouncements related to accounting information systems and internal controls; as well as the impact of possible future pronouncements.
Keywords: Sarbanes-Oxley, PCAOB, Accounting information systems

The Sarbanes-Oxley Act and the PCAOB
Massive accounting scandals in the United States between 2001 and 2002 involving notorious companies, such as Enron, Worldcom, Tyco, and various other recognized entities, led to the creation of the Sarbanes-Oxley Act of 2002. This historic piece of legislation has had a profound effect on the accounting profession since it was signed into law. As a result of the act, the PCAOB was created. Since its inception, the PCAOB has created some of the most importing accounting standards that are used every day by auditors of public companies.
The Sarbanes-Oxley Act of 2002 As a result of massive accounting scandals in the United States between 2001 and 2002 involving notorious companies, such as Enron, Worldcom, Tyco, and various other recognized entities, President George W. Bush signed into legislation during 2002 the Sarbanes-Oxley Act of 2002 (hereinafter “SOX”) also known as the Public Company Accounting Reform and Investor Protection Act of 2002. According to Gelinas, Dull, and Wheeler (2012), these entities failed to enact and enforce proper governance processes throughout their organizations, and as a result, some employees boldly violated ethical codes, business rules, regulatory requirements, and statutory mandates, resulting in massive fraud. The employees of these companies were not serving God when they decided to violate the ethical codes and laws and commit fraud, they were in essence serving money. Luke 16:10-13 states, “One who is faithful in a very little is also faithful in much, and one who is dishonest in a very little is also dishonest in much. If then you have not been faithful in the unrighteous wealth, who will entrust to you the true riches? And if you have not been faithful in that which is another’s, who will give you that which is your own? No servant can serve two masters, for either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve God and money.” (ESV)
SOX was created to restore the public’s confidence in financial reporting of companies and includes some of the most significant laws the accounting profession has ever known. According to Gelinas et. al.: The key provisions of SOX are that SOX created a new accounting oversight board (the PCAOB), strengthened auditor independence rules, increased accountability of company officers and directors, mandated upper management to take responsibility for the company’s internal control structure, enhanced the quality of financial reporting, and put teeth into white-collar crime penalties. (2012, pg. 225)
Internal Control and Section 404 Internal control, according to Gelinas et. al., (2012), is a process – effected by an entity’s board of directors, management, and other personnel – designed to provide reasonable assurance regarding the achievement of objectives in the following categories: (1) the effectiveness and efficiency of operations;…