Ethical Obligations and Decision-Making in Accounting 2nd Edition by Steven Mintz, Roselyn Morris

Exercise 5

Under section 302 of Sarbanes-Oxley, companies must review their disclosure controls and procedures quarterly. To develop the controls Sarbanes-Oxley requires, CPAs need to be able to identify key control exceptions and apply a materiality concept to determine the financial impact of such exceptions. How is “a materiality concept” used “to determine the financial impact of such exceptions?”

Step 1 of 2

Internal control:

Internal control is the process designed by the management to achieve the following objectivities:

1. Effectiveness of the operations and rescue the risk of assets loss.

2. Reliability of financing and non-financing external and internal reporting.

3. Follow the applicable rules, regulations, and laws.

The Sarbanes- Oxley Act of 2002 is created by the PCAOB (Public company accounting oversight board) monitors the takeover action in the US and protecting the investor from the manipulate practice and fraudulent financial reporting by the corporation. This act crackdown the fraud and prohibited the auditor to provide consulting service to the client they auditing.