Accounting and Audit Enforcement Research Paper

Accounting and Audit Enforcement - Research Paper Example The other common names of the SOX act are Public Company Accounting Reform and Investor Protection Act or the Corporate and auditing Accountability and Responsibility Act. The SOX act stipulates that the top management of a public company must personally certify the accuracy of the financial information presented to them by the accounting department. This is to ensure that the published results are and fair according to the performance of the company during the fiscal year under scrutiny. In addition to verifying accuracy of financial information, the Act also places severe penalties against any fraudulent financial activities, as well as increasing the independence that external auditors have when they review the corporate financial statements of a company, in addition to increasing the oversight role of the board of directors (Haverkamp, 2009). The SOX act has a number of provisions which industry players, especially companies in the public sector have to adhere as well as abide to. The first element is the Public Company Accounting Oversight Board (PCAOB). This independent oversight committee of public firms also provides auditing services. The next option is the independence of the auditor from external influence from either the management or the board of directors. This law also demands that companies fulfill their corporate responsibilities such as ensuring accuracy of corporate financial results. ... There are regulations for these companies to ensure that present a review of their tax-exempt status on every fifth year of their operation. Furthermore, it was necessary for these not-for-profit companies to improve their scope as well as the quality of form 990 and financial statements. In addition, it is mandatory to improve availability of financial records in order to create greater transparency. The SOX act has put considerable pressure on not-for-profit firms, especially those that have sizable budgets to an extent that they are implementing a considerable number of practices that mirror the ones used and implemented by public companies (Rezaee, 2007). The SOX act requires health care institutions to follow the stipulation requiring them to set up an independent audit committee. This committee contains no member of the management and none of them receives any compensation from the company. Smaller organizations have to settle for a finance committee that also tops up as the au dit committee. In addition, the CFO as well as the CEO of these health care institutions has to attest to the accuracy of the financial results and Form 990, and confirm their fairness and completeness. These leaders of the health organization also have to attest to the adequacy of the internal controls of the firm. These organizations also have to make their financial results more accessible by posting them on the ‘Not-For-Profit’ website, as well as adopt and publicize a given code of ethics. The act also demands that the organization adopts the rules regarding transactions with any insider, and these include executive compensations as well as fringe benefits (Straesser, 2009). Mandating SOX requirements for all not-for profit organizations as well as other