Sarbanes-Oxley Act 2002

In recent years there have been many scandals in company accounting practices. Due to these incidents Congress created the Sarbanes-Oxley Act. In 2002 the Sarbanes-Oxley Act (SOX) as passed to reduce unethical corporate behavior and decrease the likelihood of future corporate scandals. The team found that as a result of SOX, top management must now certify the accuracy of financial information. In addition, penalties for fraudulent financial activity are much more severe. The act affects publicly held companies, certified public accountants, audit firms, and accounting firms (Holt, 2007). They are held liable for any problems that may exist in their relevant organizations. The public Company Accounting Oversight Board has been given restrictions about their membership. The Security Exchange Commission that is also mandated to select the members evaluates the Board's activities. The Board is supposed to have five members that are charged with the responsibility of analyzing the audits and investigating the auditors in those companies. The team also discussed how they are also mandated to ratify those employees or managers that have been violating the regulations.

The team agrees that the board is also in charge of developing standards to be used in public companies or foster the company to implement the standards set by other groups in issues such as quality control, independence, and auditing, among others. They are required by the act to inspect accounting companies on a regular basis and issue sanctions in areas where violation of the laws have emerged. The audit committee will be responsible for supervising and investigating the work of the auditors rather than leaving the responsibility to the management. The act mandates the committee to approve the operations of the auditors. It is also the duty of auditors to inform the committee about any new developments in areas such as accounting policies, mismatch in financial outcome processed by auditor and account among other issues in their respective organizations (Holt, 2007). Companies have been forced to rotate their audit partners and audit review personnel from their responsibilities after a period of five years. An accounting firm is forbidden to extend its audit services to any company that has a top official that worked in that firm in previous years. Heavy penalties have been exerted for companies fail to produce their work papers, destroy the documents, and commit fraud.

The team also discussed that with the implementation of SOX, companies have had to create internal control policies. The internal controls developed are in order to monitor and evaluate an organization's resources, people, information systems, and structure to facilitate the achievement of their goals. This constant evaluation is important in complying with Sarbanes-Oxley Act because it detects any form of fraud and facilitates the optimal use of the resources (Hightower, 2008). Internal