Sarbanes Oxley Act of 2004 Essay -- Investment Investor Sarbanes Oxley

Sarbanes Oxley Act of 2004 The Sarbanes-Oxley Act of 2002 was signed into law on July 30, 2002 by President Bush. The new law came after major corporate scandals involving Enron, Arthur Anderson, WorldCom. Its goals are to protect investors by improving accuracy of and reliability of corporate disclosures and to restore investor confidence. The law is considered the most important change in securities and corporate law since the New Deal. The act is named after Senator Paul Sarbanes of Maryland and Representative Michael Oxley of Ohio (Wikipedia Online).   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Sarbanes-Oxley consisted of 11 different titles or sections. Title I is Public Company Accounting Oversight Board. It created a five member panel known as the Public Company Accounting Oversight Board, overseen and appointed by the Securities and Exchange Commission (Sarbanes-Oxley). The Board is to consist of two CPAs and three people that are not CPAs, but the chairman must be a CPA. The Board is to provide oversight of auditing of public companies while establishing auditing, quality control, independence, ethical standards (Arens 32-33). Public accounting firms that work on audits must register with the Board and pay a fee. Title I also included new auditing rules. Auditors must now retain paper work for seven years, have a second partner review and approval of audit reports, evaluate whether internal controls accurately show transactions as well as sales of assets, and describe any weaknesses or noncompliant internal controls. Public accou nting firms that issue auditing reports for more than 100 companies are to be inspected every year. Accounting firms that issue audit reports for less than 100 companies must be inspected very three years. The Board can discipline or sanction accounting firms for what it deems to be negligent conduct (Conference of State Bankers Online).   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Title II of the Sarbanes-Oxley Act is Auditor Independence. It creates new rules that auditors must abide by in order to keep their objectivity and accuracy. Auditors are now banned from performing most non-audit related services like bookkeeping, actuary services, and management consulting. An auditor may no longer be the lead auditor of a firm for more than five consecutive years. Auditors are now required to report all significant accounting policies and practices used in the audit, any different trea... ... GE has said that new compliance costs are about $30 million. AIG has said that Sarbanes-Oxley is costing the company $300 million. Many European companies have also complained because they are forced to comply because they are on American stock exchanges. Surveys have also found that many companies are even thinking about going private to avoid compliance Sarbanes-Oxley (Bartlett 1-3). Works Cited Arens, Alvin, Randal Elder and Mark Beasley. Auditing and Assurance Services: An Integrated Approach. Upper Saddle River, NJ: Pearson Prentice Hall, 2005. Bartlett, Bruce. â€Å"The Crimes of Sarbanes-Oxley.† National Review 25 May 2004.   Ã‚  Ã‚  Ã‚  Ã‚  http://www.nationalreview.com/nrof_bartlett/bartlett200405250811.asp Conference of State Bankers Online. Executive Summary of the Sarbanes-Oxley Act of 2002. 10 February 2005. http://www.csbs.org/government/legislative/misc/2002_sarbanes-oxley_summary.htm Sarbanes-Oxley Act of 2002. 107 Cong., 2nd sess. 2004.   Ã‚  Ã‚  Ã‚  Ã‚   http://frwebgate.access.gpo.gov/cgibin/getdoc.cgi?dbname=107_cong_ bills&docid=f:h3763enr.tst.pdf. Sarbanes-Oxley Act. Wikipedia Online. http://en.wikipedia.org/wiki/Sarbanes- Oxley_Act.