The Accounting Profession in the 21st Century

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SOX also require that internal audits be done on an annual interval and that these audits must be certified by external auditors This measure would consequently make its hard , if not completely impossible , for company controllers to manipulate results of internal audits by possibly controlling the auditors themselves The said law also has significant effect on the auditing principles and current auditing practice because it requires that requires all financial reports include an internal control report

I would say that the accounting profession will gain higher integrity in the future since the confidence of investors and stakeholders of all companies will now rely on the integrity of the audit results and the people working on it Based on the experiences of Tyco , Worldcom , Enron and other companies who are being rigidly audited and have been audited , the accounting professionals will earn the respect of the American society , especially the investors around the world for having been instruments of implementing complete transparency in reporting the company ‘s financial statements

This is especially true with internal audit practices including the use of more rigid internal control systems 2 The Sarbanes-Oxley Act created new standards for corporate accountability and established new penalties for acts of wrongdoing It particularly holds the company ‘s heads (CEOs and CFOs ) responsible for their financial statements and through several provisions stating new reporting responsibilities and internal controls

Paper Topic: The Accounting Profession in the 21st Century SARBANES-OXLEY ACT , THE AMERICAN BUSINESS SOCIETY AND THE ACCOUNTING PROFESSION Officially named as Public Company Accounting Reform and Investor Protection Act of 2002 , the Sarbanes-Oxley Act (SOX or Sarbox ) became so controversial that it took America ‘s famous companies in their own industries , shook and even collapse as what happened to Tyco and Worldcom

This provision however is beneficial if it comes with audit integrity because audit firms and the companies to which they are connected (as in audit firm-client relationship ) can hardly make it possible to connive in intentionally misstating the company ‘s financial statements What is probably being contested with this law is its provision , known as SOX 404 compliance , which requires the establishment of internal financial controls and that these controls are to be annually audited by outside firms

This provision then limits and hopefully would eliminate company practices for maintaining one book (separate book for government reporting , for internal purposes especially companies with active labor unions , for investor reporting and the real financial books Let us take for example the case of Worldcom relative to malpractices on financial reporting which was discovered and became a turning point for the American business society through the SOX

Internal control reports are not required as with auditing standards set before SOX Aside from this , audit firms are no longer allowed to provide consulting , legal or actuarial services to their client companies , or the companies they have audited

In the near future , the American economy and the world as well , would rely on the integrity of accounting professionals for taking part of the smooth , clean and ethical internal controls practiced by every company REFERENCES 1What Is the Sarbanes-Oxley Act

Although internal checks and balances is the main purpose of auditing , traditional audit practice do not require the internal control reports as rigid as the requirements of the SOX Second , SOX ensures stakeholders that financial reporting complies with full disclosure

S securities regulations ‘ America could probably been one of the most attractive investment areas for businessmen as evidenced by hundreds of thousands of them who lost millions of dollars when Tyco and Worldcom collapse and more are threatened with the ongoing litigation of Enron SOX could have been really powerful , if not that considered effective in trying to dig into the irregularities within a billion-dollar-company that it was able to run after the most powerful people behind the said American business tycoons In one issue of the Times Magazine (online , featuring the Sarbanes-Oxley Act , it stressed that it was because of the provision of SOX that Bernie Ebbers of Worldcom was convicted in March 2005 for an accounting fraud amounting to 11 billion (Kay , Joseph 2002

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