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

Exercise 15

One of the most controversial requirements of the Sarbanes-Oxley Act is Section 404 – management’s assessment of internal controls over financial reporting. The Act requires the auditor to review the assessment and issue an independent opinion integrated with the audit on the financial statements. Publicly-owned companies in the U.S. have been following these requirements for several years. As for foreign entities that list their stock on U.S. exchanges, the implementation of Section 404 was initially delayed for accelerated (larger) filers until financial statements issued for the year-ended after December 31, 2007. Do you think foreign companies should be burdened with Section 404 requirements? How might widespread application of Section 404 standards to foreign entities affect stock listings in the U.S.? Should the SEC be worried about the possible implications of holding foreign entities to the same standards as U.S. companies?

Step 1 of 2

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.

SEC:

SEC is the first federal regulator market created in 1934. It is an independent agency of the federal government. SEC authority in the accounting regulatory environment: It takes action against the lawbreakers.