Sarbanes-Oxley Act of 2002 was signed into law on July 30, 2002 by President Bush. The act applies to public owned companies and their associated audit firms (Kimmel et al, 2011). This Act noticeably impacts on the accounting practices and affects not just the leading accounting firms, but also active CPA working as auditors for, or of, a publicly labeled company. The primary repercussion of this Act for accountants is analyzed below.
SOX drew the map to the institution of the Public Company Accounting Oversights Board (PCAOB). The role of PCAOB role is to inspect or oversee auditors and audits of public owned companies. SOX increased the management’s accountability for financial reports through requiring the executive officers or the CFO of affected companies to verify the quarterly and yearly statements rendered to the SEC (Kimmel et al, 2011). Criminal penalties are being imposed on those who maliciously falsely attests any financial statements. The other chief impact is SOX’s condition that public companies subject reports on internal controls, acknowledging the management’s liability for assessing and maintaining controls, the efficiency of the public company’s internal control procedures and structure (Piotroski et al, 2008).
Internal controls get a significant role of complying with SOX (2002). Management might be able to establish that internal controls function effectively through their direct and follow up monitoring of the operations of controls. For example, the supervisor's appraisal of an account reconciliation submitted by one of the subordinates monitors control that also gives the management with support supporting the appraisal of internal controls over financial reports, on documentation and evaluation (Shakespeare et al, 2008). Simply, public companies that develop the routine supervision features of internal controls correctly are in a better position to achieve a high percentage of SOX (2002 compliance with reduced effort. Well designed internal controls ease the regulatory troubles, eliminate errors or fraud, and still leave the staff feeling unaffected (Stephen et al, 2004). The PCAOB opened the way to open minded compliance. All companies should take the opportunity offered by observing internal controls in compliance with SOX (2002).