The final report of the auditor should be included in the annual report of the company so that the findings become public information. Sox-online.com (2006). Section 201 of the Sarbanes-Oxley Act. Retrieved January 19, 2012 from http://www.sox-online.com/act_section_201.html 2. The five major areas covered by the American Institute of Certified Public Accountants (AICPA) are: code of professional conduct, auditing standards, compilation and review standards, other attestation standards, and consulting standards.
I believe that all areas are important due to the fact that they are part of a unique algorithm the must be followed to properly conduct an audit. If I were to choose one area that stands out from the rest it would be the code of professional conduct. During the Enron scandal a lack of professional conduct in the auditing process led to the biggest bankruptcy case in the history of the United States at the time. Ethics and professionals should have prevented the scandal from ever occurring, but greed took over the minds of the auditors at Arthur Anderson and they preferred to get rich than to do their jobs based on the principles of professional conduct.
The integrity of the entire process is dependent on auditors complying with the code of professional conduct. 3. I like your response and I agree with you that compliance with SOX improves the accountability of the entire auditing process. When Sarbanes Oxley was created people did not know whether the Act would work. In 2012 it seems as if the initiative has helped stabilize the information coming out of Wall Street. A lack of confidence in the market was one of the main reasons Congress got involved in the process about a decade ago.
Independence is achieved when the auditor works an audit without any external pressures to alter the results because of the existence of a conflict of interest. 4. I agree with you that the communication between the client and the auditor must be honest and open at all times. The managers of the company being audited should facilitate the process of providing the auditor with all the data and information the auditor needs to perform his job. Auditors must have superb analytical ability and great communication skills.
Verbal communication skills are required to interact with the client in order to retrieve the information necessary to complete the audit in an efficient manner. 5. Information risk occurred back in 2001 when the Enron scandal was revealed. In this case the risks of information occur because of collusion between the executive management team and Author Anderson. It would be hard to visualize in 2012 how history could repeat itself at such as large scale since compliance with SOX reassures external groups that the firm’s financial data is free of material error or fraud.
I agree with you that the Public Company Accounting Oversight Board was very instrumental in improving the reliability of accounting information. 6. I agree with you response in regards to the importance of professional conduct. When accountants are dirty it is highly feasible for a smart accountant to cook up the books in order
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