The landscape of financial reporting

What competencies were you able to develop in researching and writing the Comprehensive Project due in Unit 5? How did you leverage feedback from your peers in the Discussion Board for Units 1- 4 in completing the Project? How will these competencies and knowledge support your career advancement in financial management?

Running head: FINANCE
Finance
Name of the Student
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Authors Note
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Table of Contents
The purpose of SOX:.................................................................................................................2
SOX Titles I–VI:........................................................................................................................2
Explain specifically why external auditors are no longer permitted to do significant
consulting for a firm that it is auditing:......................................................................................3
Describe why most companies expect significant added costs to their firm as a result of SOX
compliance:................................................................................................................................3
References:.................................................................................................................................4

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The purpose of SOX:
The SOX was created and signed in as law during the year 30 July 2002 by the
president Bush. The main purpose of this Act is to oversee the landscape of financial
reporting for finance professionals. Its purpose is to review the legislative audit requirements
and project the investors by enhancing the accuracy as well as reliability of company
disclosures (Campbell et al., 2015). The SOX purpose is also to safeguard the investors by
enhancing the accuracy and reliability of the company disclosure. As a whole, the main
purpose of SOX is to lower the fraud at company level by considering the CEO personally
accountable for frauds.
SOX Titles I–VI:
The SOX Titles I comprises of the public company that is responsible for oversighting
the board. under this it mainly includes the establishment of administrative provisions,
registration with the board, auditing quality control and independence of the standard as well
as rules. While Title II includes the independence of auditor (Gray & Ehoff 2015). Under this
it mainly comprised of services that were out of the scope of auditors practice. Under sec 202,
it included preapproval of requirements and rotation of audit partners.
The Title III included the corporate responsibility. Accordingly, under 301 of this title
the public audit company were mainly held accountable. While sec 302 of this act involved
corporate social responsibility for the financial reports. Section 303 dealt with the
inappropriate influence on conduct of audit while section 304 involved the forfeiture of
certain bonuses and profits. The title IV involved improved financial disclosures (Kecskés,
2016). Under the section 401 of this title its main purpose is to disclosure in periodic reports
while under section 402 it enhanced the conflict of interest provision. Section 403 of this act

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included making disclosure of transactions that involved management as well as principal
stakeholders.
Explain specifically why external auditors are no longer permitted to do significant
consulting for a firm that it is auditing:
The external auditors are not any more permitted to perform significant consulting for
a firm which is auditing because there are certain types of prohibited relationships among the
audit firms and the companies. This includes the one-year cooling period which is needed
prior to company can hire the certain individuals previous employed by the auditor in the role
of financial reporting oversight (Chu & Hsu, 2018). The audit committee is under obligation
of not approving engagements which remunerates the independent auditor based on the
contingent fee or on the commission basis. Such kind of remuneration is viewed as impair to
the independence of auditor. The audit committee should be aware that no financial
relationships among the company and external auditor is prohibited.
Describe why most companies expect significant added costs to their firm as a result of
SOX compliance:
The smaller companies that are having less complex business typically needs less
complex control and the work of auditor must be reflected in that. The internal auditing such
as financial statement auditing cannot be considered as one size which fits in every exercise.
The board members have publicly stated that it will use its inspection program to assure that
the smaller companies are not under the subject of unnecessary costs and burdens.

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References:
Campbell, J. L., Hansen, J., Simon, C. A., & Smith, J. L. (2015). Audit committee stock
options and financial reporting quality after the Sarbanes-Oxley Act of
2002. Auditing: A Journal of Practice & Theory, 34(2), 91-120.
Chu, B., & Hsu, Y. (2018). Non-audit services and audit quality---the effect of Sarbanes-
Oxley Act. Asia Pacific Management Review, 23(3), 201-208.
Gray, D., & Ehoff Jr, C. (2015). Sarbanes-oxley and dodd frank: Then there was
fraud. Journal of Business & Economics Research (JBER), 13(1), 19-26.
Kecskés, A. (2016). The Sarbanes-Oxley act from a legislative viewpoint. The Theory and
Practice of Legislation, 4(1), 27-43.