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Financial Reporting Disclosure

In: Business and Management

Submitted By Jessab
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"Financial Reporting Disclosures" Please respond to the following:
Discuss the impact of the Sarbanes-Oxley Act (SOX) on financial reporting and disclosure and assess whether or not you believe it helps provide accurate information to users of financial statements.

The impact of the SOX act on financial reporting and disclosure is that it is the management’s responsibility on how effective is company’s internal controls. Management cannot pretend that they do not know the imperfections of the company’s financial statements because they must sign annual reports that their company submits to the Security Exchange Commission. This ensures that the financial data is accurate. It made management responsible for financial statements. Inaccurate financial statements can lead to stiff penalties levied on management and others. Section 404 of the SOX act outlines management responsibilities on the annual report.

Suggest an alternative to regulation for providing accurate financial information to stakeholders.
Large corporations are covered by the SOX act. For small companies, it is difficult to follow the SOX act. If congress can add an amendment for small businesses, it would help small businesses comply with the standards of the SOX act.
Schroeder, R., Clark, M., & Cathey, J. (2011). Financial accounting theory and analysis: Text and cases.(10th ed.). Hoboken, NJ: John Wiley & Sons.
U.S. Securities and Exchange Commission. (2008). Final Rule: Management’s Report on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports. Background. Retreived on September 6, 2012 from http://www.sec.gov/rules/final/33-8238.htm

"Ethical Responsibilities" Please respond to the following: * Create a scenario of accounting behavior that may be legal but not ethical. Explain your rationale.
An individual main employment is an auditor for an accounting firm. They decided to help some family and friends by preparing their taxes. One of the friends is a custodian for a company that is a client of the auditor. Although the friend makes no decisions regarding the financial health of the company, the perception is that the individual is doing non auditing work for the company. How does the individual maintain independence? He may lose his job over preparing taxes. He should refrain from preparing taxes for the friend or get the friend to sign a statement that the tax preparation is separate from his business with the client. * Evaluate whether or not accounting professionals have an expected higher ethical standard than other professions.
“Accountants, as professionals are expected to maintain a level of ethical conduct that goes beyond society’s laws. The reason for this high level of ethical conduct is the need for public confidence in the quality of services provided by the profession, regardless of the individual providing the service.” (Schroeder, Clark, Cathey, p578) In the accounting profession, public confidence is very important. Accounting professionals has to have the confidence of the public they serve. The accounting professionals have several accounting associations that have rules regarding ethical behavior. Accounting professionals has to be held to a higher level, because they are dealing with the public. The public has to have the confidence that the professional accountant will do the right thing.
Schroeder, R., Clark, M., & Cathey, J. (2011). Financial accounting theory and analysis: Text and cases.(10th ed.). Hoboken, NJ: John Wiley & Sons.…...

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