Concept explainers
As the controller of a financial company, take pride in the and internal
The passage of the Sarbanes-Oxley Act, with its emphasis on testing internal control systems, initiated several changes. You have studied the law and made adjustments to ensure you comply with the regulations, even though it has created additional work. Your auditors, however, have chosen to interpret SOX very aggressively—too much so, in your opinion. The auditors have recommended that you make costly improvements to your systems and also enlarged the scope of the
Using a web search tool, locate articles about this topic and then write the responses to the following questions.Be sure to support your arguments and cite your sources.
Ethical Dilemma: Should you change auditors because your current one is too stringent in applying theSarbanes-Oxley Act? What other steps could you take to this situation?
Sources: Loren Kasuske, "The 4 Biggest Pros and Cons of the Sarbanes-Oxley Act,https://ktconnections.com, June 8, 2017; Terry Sheridan, "Financial Services Spend More than $1M Annually on SOX,"https://www.accountingweb.com, August 2, 2016; "Sarbanes-Oxley Is Paying Off for Companies Despite Increased Costs and Hours. Protiviti Survey Finds."http://www.pmewswirexom, June 2, 2016; Daniel Kim. "Top 3 Ways to Reduce SOX Compliance Costs," https://www.soxhub.com, December 14, 2015.
To determine:
Whether the auditors should be changed because the current one is too stringent in applying the Sarbanes-Oxley Act, and what other steps could be taken to resolving this situation.
Introduction:
The Sarbanes-Oxley Act (SOX) was passed by the US Congress in 2002, in terms to protecting investors from fraudulent financial reporting by corporations such as auditors, accountants and corporate officers.
Explanation of Solution
By not complying with the SOX Act, the company may face larger issues in the future with the mistrust of investors and eventually losing them, which would affect the capital intake and stock market value of the firm.
Therefore, it would be more relevant for the medium-sized financial services company to take in the input of the auditors and make more relevant changes in accordance to the relevance to the act because if not; there can be risks which would have to be taken. Believing that the company follows the passage of the SOX Act, it would not suffice that all the sections of the Act are followed. Thereby, suggesting keeping the auditors, and rather renovate the company's operational facilities.
In accordance to resolve the issue, first the Board of Directors or the top management would have to be briefed about the whole SOX Act and should be notified of the risks and losses which would have to be faced with not fully complying with the Act, and how it can affect their shareholdings as a result.
Then full review of the company's books in-house should be done to understand the points in which they are not completely following the Act.
And last, subsistent changes to the company should be made and new contingent plans should be made following the course of the Act. This would allow them to relive the streak of continuous compliments by their auditors on their procedures.
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