Ethics and Financial Reporting - 2997 Words

Ethics and Financial Reporting AMBA 630 Executive Summary Reacting to a flood of accounting scandals and media outcry, the U.S. Congress passed the Sarbanes-Oxley Act (SOX) in July 2002. It is administered by the Securities and Exchange Commission (SEC). It sought to prevent future cases such as the one witnessed with Madoff Investment Securities, by improving the accuracy of public company financial statements. An important goal of SOX is to make these financials more meaningful (i.e., transparent) to their intended readers. . It sets guidelines for the corporate board of directors, CEOs and CFOs, audit committees, internal audit function and internal control system. . . Boards of directors are now expected to take a†¦show more content†¦Audit committees incorporating SOX principles have spent a lot of time on SOX compliance issues, while sometimes neglecting strategy concerns. However, once past the learning curve, they started focusing more on increasing business value (p. 1). They are paying more attention to effective accounting principles and risk, since they have to help restore confidence in corporations (p. 1). They need to make sure financial projections are sound and accurate based on earnings and income estimates, before the information is released to the public. They should also assist management mitigate financial risks, as their responsibility is to understand and sign off on management’s approach (p. 2). Ever since SOX, restatements have increased (from 50 to 3000 from 2005 to 2007; increasing costs and driving declines in stock prices) and audit committees have needed independent auditors more often to be compliant (p. 3). These issues need to be resolved once and for all by focusing on the committee’s composition (a member of the board of directors of the issuer and independent should be privileged as per section 301 of SOX provisions). They should also include financial experts that will help decipher financial statements in which the audit committee will relay to the board, as well as assess competition’s performances (p. 3). 3. The CEO’s and CFO’s of public companies The SOX Act put CEOs under the spotlight and putShow MoreRelatedEthics and Financial Reporting3003 Words   |  13 PagesEthics and Financial Reporting AMBA 630 Executive Summary Reacting to a flood of accounting scandals and media outcry, the U.S. Congress passed the Sarbanes-Oxley Act (SOX) in July 2002. It is administered by the Securities and Exchange Commission (SEC). It sought to prevent future cases such as the one witnessed with Madoff Investment Securities, by improving the accuracy of public company financial statements. An important goal of SOX is to make these financials more meaningful (i.e., transparent)Read MoreEthics And Financial Reporting Decisions948 Words   |  4 PagesAbstract. 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