Audit Standard Setting and Inspection for U.S. Public Companies: A Critical Assessment and Recommendations for Fundamental Change

2009 ◽  
Vol 23 (2) ◽  
pp. 221-237 ◽  
Author(s):  
Steven M. Glover ◽  
Douglas F. Prawitt ◽  
Mark H. Taylor
Keyword(s):  
Standard Setting ◽  
The United States ◽  
Current Approach ◽  
Public Companies ◽  
Accounting Firms ◽  
Publicly Traded Companies ◽  
Sarbanes Oxley ◽  
Composition And Structure ◽  
Audit Standard ◽  
High Level

SYNOPSIS: The Sarbanes-Oxley Act of 2002 (SOX) established the Public Company Accounting Oversight Board (PCAOB) to oversee the accounting firms that audit publicly traded companies in the United States. In this commentary we outline why we believe the PCAOB’s audit standard-setting and inspection models are inefficient and dysfunctional. We assert that the Board’s ability to achieve its mission is limited by its early choices, together with its incentives, organizational composition, and structure. We support our assertions with a number of indicators of serious problems and flaws in the current approach. We also present high-level recommendations for change for policy makers, regulators, and leaders in the profession to consider in developing improved approaches to audit standard setting, inspection, and enforcement.

scholarly journals A Retrospective Look at the Sarbanes-Oxley Act of 2002- Has it accomplished its original purpose?

2015 ◽  
Vol 31 (2) ◽  
pp. 585 ◽  
Author(s):  
Anthony Basile ◽  
Sheila Handy ◽  
Felisha N. Fret
Keyword(s):  
The United States ◽  
Regulatory Agencies ◽  
United States Congress ◽  
Publicly Traded ◽  
Private Companies ◽  
Public Companies ◽  
Publicly Traded Companies ◽  
Sarbanes Oxley ◽  
Policies And Procedures ◽  
Internal Framework

As a result of notable frauds including Enron, WorldCom and Waste Management, the United States Congress enacted the Sarbanes-Oxley Act of 2002 (SOX). The Act would forever change the accounting profession. After a little more than a decade, publicly traded companies have been able to create and implement policies and procedures to ensure compliance with the Act, specifically the provisions set forth in Section 404. Since all public companies have implemented SOX compliance together with other regulations imposed by the Internal Revenue Service and other regulatory agencies into their normal reporting routines, management of these companies have realized further benefits associated with SOX compliance. Because of these reported benefits many private companies have begun to voluntarily implement SOX-like policies and procedures into their own internal framework. This paper will discuss the perceptions of the enactment and implementation of the Act, the associated benefits derived from SOX compliance and reasons why private companies have begun voluntarily adopting SOX-like policiesprocedures and strategies.

Ethics and Security under the Sarbanes-Oxley Act

2011 ◽  
pp. 254-259
Author(s):  
Thomas J. Tribunella ◽  
Heidi R. Tribunella
Keyword(s):  
Public Policy ◽  
Ethical Issues ◽  
The United States ◽  
Financial Information ◽  
Accounting Firms ◽  
Role Of Government ◽  
Sarbanes Oxley ◽  
The Impact ◽  
Arthur Andersen

The role of government, the impact of legislation, and the interaction of public policy with capital markets in the United States will be addressed in this article. In addition, we will review the ethical issues that were encountered by large accounting firms such as Arthur Andersen in their efforts to audit the financial information of clients such as Enron and Global Crossing.

Using a Movie to Study the COSO Internal Control Framework: An Instructional Case

2008 ◽  
Vol 22 (1) ◽  
pp. 63-76 ◽  
Author(s):  
Arline Savage ◽  
Carolyn Strand Norman ◽  
Kathryn A. S. Lancaster
Keyword(s):  
Internal Control ◽  
House Of Representatives ◽  
Financial Institution ◽  
Internal Controls ◽  
Publicly Traded ◽  
Accounting Firms ◽  
Publicly Traded Companies ◽  
Sarbanes Oxley ◽  
Control Framework ◽  
Accounting Graduates

Following enactment of the Sarbanes-Oxley Act (SOX) of 2002 (U.S. House of Representatives 2002), public accounting firms and publicly traded companies are much more focused on internal controls. Accordingly, many accounting graduates will be asked to evaluate, document, and perhaps test the adequacy of an organization's internal control structure. The Committee of Sponsoring Organizations' (COSO 1992) Internal Control—Integrated Framework is the most widely used tool for this purpose. This instructional case, based on the movie, Rogue Trader, gives students the opportunity to see the consequences of lax corporate governance and weak internal controls at the Barings Bank. Students view the movie and then use the COSO framework to critically analyze the collapse of a well-established financial institution.

scholarly journals Increasing Transparency: A Prototype of the Nonpublic Portions of PCAOB Large-Firm Inspection Reports

2011 ◽  
Vol 5 (1) ◽  
pp. A1-A21 ◽  
Author(s):  
Rachael J. Evans ◽  
Ronald S. Boster ◽  
Bill Gradison
Keyword(s):  
Quality Control ◽  
Large Firm ◽  
Public Companies ◽  
Accounting Firms ◽  
The Public ◽  
Sarbanes Oxley ◽  
Public Company ◽  
Audit Reports

SUMMARY:The Sarbanes–Oxley Act of 2002 created the Public Company Accounting Oversight Board (PCAOB) and requires it to conduct annual inspections of accounting firms that regularly provide audit reports for more than 100 public companies (issuers). Certain information in these reports is, by law, nonpublic—in particular, findings of “quality control” (QC) deficiencies. Having access to nonpublic portions of PCAOB inspection reports, the authors create an illustrative example of a nonpublic portion of a large-firm inspection report, albeit with specific firms and issuers de-identified.

scholarly journals Regulating Biotechnology in the Age of Homeland Security

2003 ◽  
Vol 16 (2) ◽  
pp. 38-51
Author(s):  
Judith Reppy
Keyword(s):  
Homeland Security ◽  
The United States ◽  
Current Approach ◽  
Biological Weapons ◽  
Regulatory Regime ◽  
Scientific Journals ◽  
Security Risks ◽  
September 11 Terrorist Attacks ◽  
High Level ◽  
Rule Making

The anthrax letters in the United States in October 2001, coming soon after the September 11 terrorist attacks, raised the fear of bioterrorism to a high level. Legislation to restrict access to select agents (i.e., those pathogens considered likely to be used in biological weapons) and to screen laboratory personnel for security risks soon followed; in addition, the major scientific journals in the field have agreed to practice self-censorship to prevent the publication of information that might be useful to terrorists. These developments are ushering in a new relationship between the field of biology and the state, raising important issues of governance. In this article I summarize the new regulatory regime, analyse its likely impact on the research community, and discuss the problems that the current approach to rule making creates for legitimacy and acceptance of the new regime.

scholarly journals Assessing Board Members In The Nonprofit Organizational Arena: Increased Board Responsibilities Dictated By Sarbanes Oxley

2011 ◽  
Vol 5 (7) ◽  
Author(s):  
Gregory P. Trudeau
Keyword(s):  
Nonprofit Organizations ◽  
Audit Fees ◽  
Assessment Process ◽  
Board Members ◽  
Public Accounting ◽  
Accounting Firms ◽  
Publicly Traded Companies ◽  
Corporate Scandals ◽  
Sarbanes Oxley ◽  
The Board Of Directors

Numerous corporate scandals of the 1990’s and 2000’s, coupled with public accounting firms generating high non-audit fees, eroded the publics’ confidence in the concept public accounting independence.  These scandals and the erosion of confidence in the auditor’s independence resulted in Congress passing the Sarbanes-Oxley Act in 2002.  While Sarbanes-Oxley applies mainly to publicly traded companies, proactive, progressive nonprofit organizations will also reap the benefits of Sarbanes-Oxley.  In fact, Board Source (2003) indicates, “Indeed, some state attorney generals are already proposing that elements of the Sarbanes-Oxley Act be applied to nonprofit organizations.”  According to this author, whether this law eventually extends to the nonprofit arena or not, an increase in responsibility of board members of nonprofit organizations is inevitable. Due to the increased responsibilities board members assume, Boards would be well advised to increase their self assessment process.  This paper will look at assessing the Board of Directors in light of the new responsibilities Board Members assume in conjunction with the increased responsibilities resulting from the Sarbanes-Oxley Act.

scholarly journals Auditor Compensation Pattern Of S&P 500 Corporations Before And After The Passage Of Sarbanes-Oxley Act

2011 ◽  
Vol 23 (2) ◽  
Author(s):  
Ganesh M. Pandit ◽  
Vijaya Subrahmanyam ◽  
Allen Rubenfield
Keyword(s):  
Audit Fees ◽  
Audit Process ◽  
Public Companies ◽  
Publicly Traded Companies ◽  
Corporate Scandals ◽  
Cpa Firms ◽  
Sarbanes Oxley ◽  
Big 4 ◽  
Before And After ◽  
Different Sources

<p class="MsoBodyTextIndent" style="text-align: justify; text-indent: 0in; margin: 0in 34.2pt 0pt 0.5in;"><span style="font-family: Times New Roman; font-size: x-small;">The years 2001-02 were marked with an outburst of huge corporate financial failures that eroded billions of dollars from the stockholders&rsquo; equity and shook the confidence of the investor community. One of the issues that rose to the surface was the payment of huge nonaudit service fees by publicly traded companies to their auditors.<span style="mso-spacerun: yes;">&nbsp; </span>In response to the outcry against the alleged role of the auditors in the corporate scandals, Congress passed Sarbanes-Oxley Act of 2002 (SOX), which imposed a prohibition on the supply of certain nonaudit services by a CPA firm to its audit clients in order to reduce the suspected<span style="mso-spacerun: yes;">&nbsp; </span>revenue-dependence of auditors on their audit clients.<span style="mso-spacerun: yes;">&nbsp; </span>The study described in this paper examines the pattern of auditor compensation in the years 2001 and 2004 (i.e., pre- and post-SOX periods), for a sample of large public companies, to determine how the auditor compensation has changed during this three-year period and whether the new regulations have decreased such revenue-dependence of the auditor. The study also examines if each of the Big 4 CPA firms that dominate the audit market for large public companies have experienced a change in the pattern of their revenues drawn from different sources of auditor compensation. The results show that not only the composition of auditor compensation has changed after the passage of SOX but also the overall compensation paid by the sampled companies to their auditors has gone up noticeably in many cases, primarily due to a phenomenal rise in audit fees, which still may continue to threaten the auditor&rsquo;s independence in the audit process.<span style="mso-spacerun: yes;">&nbsp; </span>Further, during this three-year period, each of the Big 4 CPA firms has shifted its emphasis on the different sources of its revenues from these large public companies.</span></p>

Auditing the Auditors: A Case on PCAOB Inspection Reports of Registered Public Accounting Firms

2009 ◽  
Vol 3 (1) ◽  
pp. B1-B18 ◽  
Author(s):  
Brian Daugherty ◽  
Marshall K. Pitman
Keyword(s):  
Public Accounting ◽  
Public Companies ◽  
Accounting Firms ◽  
Audit Firm ◽  
The Public ◽  
Sarbanes Oxley ◽  
Public Company ◽  
Public Accounting Firms ◽  
Audit Evidence ◽  
Inspection Process

SUMMARY: We present a timely practice-oriented case related to the inspection process of registered firms by the Public Company Accounting Oversight Board (PCAOB). This case allows auditing students an opportunity to explore the unique challenges that public accounting firms auditing U.S. public companies face with respect to the PCAOB inspection process. The case focuses on large and small registered firms (inspected annually and triennially, respectively) receiving an inspection report where the PCAOB identified certain matters considered to be audit deficiencies of such significance that the inspection team believed the audit firm did not obtain sufficient competent evidential matter to support the auditor’s opinion. The case exposes students to the PCAOB inspection process, highlights many deficiencies noted to date by the PCAOB inspectors, and emphasizes the importance of sufficient and appropriately documented audit evidence to support audit opinions. By reviewing ‘deficient’ inspection reports, students gain an appreciation for common audit deficiencies as well as the subjective nature of portions of the authoritative literature and the inspection process itself. The case reinforces students’ understanding of the practical matters involved in appropriately obtaining, evaluating, and documenting audit evidence, as well as educates students on the PCAOB inspection process in order to address important competencies required of Sarbanes-Oxley era audit professionals.

scholarly journals Non-executive reporting requirements for public companies

2009 ◽  
Vol 5 (2) ◽  
pp. 36-41
Author(s):  
Mark Rome
Keyword(s):  
United States ◽  
Value Added ◽  
The United States ◽  
Publicly Traded ◽  
Public Companies ◽  
Publicly Traded Companies ◽  
Executive Staff ◽  
Reporting Requirements

Non-Executive Reporting Requirements should empower non-executive staff of publicly traded companies with a structured process to communicate value-added information directly with analysts, investors and regulators on a recurring basis without fear of reprisal or reprimand. This paper analyses non-executive reporting requirements for public companies in the United States.

scholarly journals A Proposed Supplemental Teaching Model For Enhancing Students Understanding Of Sarbanes Oxley

2009 ◽  
Vol 2 (1) ◽  
pp. 59-62
Author(s):  
James Specht ◽  
Albert Kagan ◽  
Scott D. Maanum
Keyword(s):  
Accounting Students ◽  
Publicly Traded ◽  
Financial Reports ◽  
Accounting Firms ◽  
Publicly Traded Companies ◽  
Entry Level ◽  
Sarbanes Oxley ◽  
Public Company ◽  
Auditing Standards ◽  
Approach To Teaching

The Sarbanes Oxley Act of 2002 brought about major changes in how accounting firms conduct audits of publicly traded companies. Corporate officials have additional responsibilities in the areas of internal controls and financial reports. In addition there is a new organization responsible for established auditing standards for publicly traded companies, the Public Company Accounting Oversight Board. Accordingly, there are new requirements and responsibilities for auditors of publicly traded companies. In effect, the emergence of separate auditing standards for publicly traded companies and for companies that are not publicly traded is creating two distinct fields of auditing. These changes require a different approach to teaching auditing to accounting students. This article proposes one approach to teaching these significant changes for entry level auditors.

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