close
test_template

The Correct Financial Reporting

Human-Written
download print

About this sample

About this sample

close
Human-Written

Words: 490 |

Page: 1|

3 min read

Published: Jan 29, 2019

Words: 490|Page: 1|3 min read

Published: Jan 29, 2019

Table of contents

  1. Provisions impacting the Financial Reporting
  2. Accounting standards and oversight:
  3. Reporting timing standards
  4. Responsibility standards
  5. Conflict and independence standards
  6. Document standards

On the backdrop of high profile accounting frauds and misstatements, Sarbanes – Oxley Act (SOX) was introduced in 2002 with an intended goal to make corporate accounting more transparent. Security Exchange Commission (SEC) was handed the enforcement responsibility and a new oversight body was formed the Public Company Accounting Oversight Board (PCAOB) for implementation of different provisions of the act.

Provisions impacting the Financial Reporting

Since these provisions fall under various provisions like Section 302 – Disclosure of controls, Section 401 - Disclosures in periodic reports (Off-balance sheet items), Section 402 - Assessment of internal control and the others. So, for simplicity we can break it into the following to understanding the impact on financial reporting:

  • Accounting standards and oversight
  • Reporting timing standards
  • Responsibility standards
  • Conflict and independence standards, document standards

Accounting standards and oversight:

Public Company Accounting Oversight Board (PCAOB): The law led to the formation of PCAOB, which constitute of independent five members board. Their duties are to:

  1. register the public accounting firms
  2. establishing work, ethics, independence and other standards for these firms
  3. conducting compliance audit of such firms
  4. taking initiatives for improving the quality of auditing services

Standards: SOX mandate that corporations use Generally Accepted Accounting Principles (GAAP) in reporting their balance sheets to shareholders and Financial Accounting Standards Board (FASB) will set the official standards.

Disclosures: All off-balance sheet transactions like operating lease and other relationships with unconsolidated entities must be disclosed in a separate section of the notes. Internal controls: It requires the companies to conduct an assessment of the effectiveness of the organization’s internal controls, and a provide a statement identifying the framework used by management to evaluate the effectiveness of internal controls.

Reporting timing standards

As per the act, all material changes in financial condition or operations must have a real-time disclosure e.g. all designated securities transactions done by directors, officers and 10% stockholders must disclose designated securities tractions within two business days.

Responsibility standards

The CEO and CFO of the company must certify the accuracy and fairness of the audited financial statements. An intentional violation here will attract a penalty of up to $5 million and 20 years of imprisonment. CEO and CFO must also certify that any significant deficiencies in internal controls, frauds etc. have been disclosed to the audit committee and the auditors.

Conflict and independence standards

Public accounting firms: A registered accounting firm is prohibited from providing any non-audit services (listed) to an audit client coexisting with the audit. This aimed at a minimalizing possible conflict of interest and compromises of integrity in the audit.

The audit committee: The act requires for setting up of an independent audit committee which helps in improving the governance by separating the functions of oversight from management.

Get a custom paper now from our expert writers.

Document standards

The work papers from the audit engagement must be maintained for a period of five years and if the audit firm is registered under PCAOB then for seven years. Any act of destroying, altering with any sort of document with an intent to influence any investigation will attract up to 20 years of imprisonment.

Image of Prof. Linda Burke
This essay was reviewed by
Prof. Linda Burke

Cite this Essay

The Correct Financial Reporting. (2019, January 28). GradesFixer. Retrieved December 8, 2024, from https://gradesfixer.com/free-essay-examples/provisions-impacting-the-financial-reporting/
“The Correct Financial Reporting.” GradesFixer, 28 Jan. 2019, gradesfixer.com/free-essay-examples/provisions-impacting-the-financial-reporting/
The Correct Financial Reporting. [online]. Available at: <https://gradesfixer.com/free-essay-examples/provisions-impacting-the-financial-reporting/> [Accessed 8 Dec. 2024].
The Correct Financial Reporting [Internet]. GradesFixer. 2019 Jan 28 [cited 2024 Dec 8]. Available from: https://gradesfixer.com/free-essay-examples/provisions-impacting-the-financial-reporting/
copy
Keep in mind: This sample was shared by another student.
  • 450+ experts on 30 subjects ready to help
  • Custom essay delivered in as few as 3 hours
Write my essay

Still can’t find what you need?

Browse our vast selection of original essay samples, each expertly formatted and styled

close

Where do you want us to send this sample?

    By clicking “Continue”, you agree to our terms of service and privacy policy.

    close

    Be careful. This essay is not unique

    This essay was donated by a student and is likely to have been used and submitted before

    Download this Sample

    Free samples may contain mistakes and not unique parts

    close

    Sorry, we could not paraphrase this essay. Our professional writers can rewrite it and get you a unique paper.

    close

    Thanks!

    Please check your inbox.

    We can write you a custom essay that will follow your exact instructions and meet the deadlines. Let's fix your grades together!

    clock-banner-side

    Get Your
    Personalized Essay in 3 Hours or Less!

    exit-popup-close
    We can help you get a better grade and deliver your task on time!
    • Instructions Followed To The Letter
    • Deadlines Met At Every Stage
    • Unique And Plagiarism Free
    Order your paper now