Sarbanes_Oxley_Act_Impacts

Running head: SARBANES-OXLEY ACT Sarbanes-Oxley Act Sarbanes-Oxley Act Examine an auditing issue that is impacted by Sarbanes-Oxley. One of the auditing issues that were impacted heavily by the Sarbanes-Oxley Act was the issue independence or of what services can and cannot be practiced outside the scope of auditors. “Internal auditors should be independent of the activities they audit. Such independence permits auditors to perform their work feely and objectively. Without independence, the desired results of internal auditing cannot be realized (Simmons, 1995). “ Compare and contrast that issue before and after the Sarbanes-Oxley Act was implemented. The Research Foundation of the Institute of Internal Auditors published a report in 1995. This report studied non-traditional services performed by internal auditors and found that by performing those services auditors were at high risk of jeopardizing independence. One notable case was Anderson LLC, they were at one time one of the five largest auditing partnerships in the world, Anderson, LLC., performed auditing and consulting services for none other than Enron, Anderson, LLC, made more money consulting for Enron than they did performing auditing services. It was in part because of the Enron scandal that the Sarbanes-Oxley Act came to be. Section 201, of the Sarbanes-Oxley Act deals with services outside the scope of practice of auditors. This section prohibits bookkeeping or other services related to the accounting records or financial statements of the audit client; financial information systems design and implementation; appraisal or valuation services, fairness opinions, or contribution-in-kind reports; actuarial services; internal audit outsourcing services; management functions or human resources; broker or dealer, investment adviser, or investment banking services; legal services and expert services unrelated to the audit; and any other service that the Board determines, by regulation, is impermissible. And if any non-audit services are provided they must be approved in advance by the audit committee. Determine the impact that the Act had on that particular issue, on accountants and auditors, and on stakeholders. Before the Sarbanes-Oxley Act the maximum penalty for fraud was five years, now it is twenty-five years maximum. Fraud was not taken very seriously which is why corruption was so high, making the accounting and auditing professions look like the scum of the earth. Section 807 of the Sarbanes-Oxley Act states; “Whoever knowingly executes, or attempts to execute, a scheme or artifice to defraud any person in connection with any security of an issuer with a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l) or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)); or to obtain, by means of false or fraudulent pretenses, representations, or promises, any money or property in connection with the purchase or sale of any security of an issuer with a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l) or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)); shall be fined under this title, or imprisoned not more than 25 years, or both (SOX-online: The Vendor-Neutral Sarbanes-Oxley Site).'” While this section of the Act is a huge step in keeping fraud down, I think that some should not be allowed to provide auditing or financial services once they have committed such a crime, I would like to see something similar to doctors who commit crimes lose their licenses. Analyze the general impact Sarbanes-Oxley had on the auditing process as a whole. The Sarbanes-Oxley Act has impacted the auditing process because it changed how audit committees, corporate management and auditors of publicly traded companies carried out their responsibilities and changed how they interacted with each other. By setting strict guidelines and stiff penalties, morals and ethics have come back to the auditing profession. The purpose of legislation like the Sarbanes-Oxley Act is meant to deter wrongdoing by corporations and auditors alike. While the corruption seem to be going down, I am sure we will see more legislation such as this to keep the corruption to a minimum, I am sure we will see fines and penalties for fraud go up as well. References Randa J. Elder, M. S. (2008). Auditing and Assurance Services. New Jersey: Pearson Prentice Hall. Simmons, M. R. (1995). Internal Auditing and Fraud Investigation. Retrieved May 18, 2011, from Facilitatedcontrols.com: http://www.facilitatedcontrols.com/internal-auditing/consult.shtml SOX-online: The Vendor-Neutral Sarbanes-Oxley. (n.d.). Retrieved May 18, 2011, from SOX-Online.com: http://www.sox-online.com/act_section_807.html SOX-online: The Vendor-Neutral Sarbanes-Oxley Site. (n.d.). Retrieved May 18, 2011, from SOX-Online.com: http://www.sox-online.com/act_section_201.html