Ford Motor Company Auditing Report: Sarbanes-Oxley Act Impact

This report examines the auditing practices of Ford Motor Company, focusing on the impact of the Sarbanes-Oxley Act (SOX). It highlights the significance of the SOX Act, enacted in 2002 to restore confidence in financial markets and address corporate scandals. The report details how SOX strengthens audit committees, making directors and officers accountable for financial statements. It discusses the establishment of penalties for fraud, changes in public accounting firms' operations, and the act's influence on management's responsibilities in financial reporting. Furthermore, the report analyzes the act's impact on disclosure requirements, including off-balance sheet arrangements and stock transactions, and the establishment of the Public Company Accounting Oversight Board. The analysis underscores the importance of audit committees, non-management members, external auditors, and the overall impact of SOX on corporate governance and financial reporting practices within Ford Motor Company.

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In the prolonged period, there are several corporate scandals that can be seen all over
the world. To take control all these scandals, the United States has enacted an act known as
Sarbanes-Oxley Act (SOX) in the year 2002 of July. It has been made keeping in mind that it
has been done to restore the confidence in the financial markets and will help in closing the
loop holes that does allow the public organizations to defraud the investors (Bhabra &
Hossain, 2017). This act has the profound effect upon the corporate governance in the United
States.
In the Sarbanes-Oxley Act, it does require the public organizations in strengthening
the audit committees, which will also perform the internal control tests, through this it will
make the directors and officers liable for the true and fair view of the financial statement and
in strengthening the closure. The Sarbanes-Oxley Act also help in establishing penalties of
the criminal activities for securing the fraud and there will be a change in the operations of
the public accounting firms. Through introducing the Sarbanes-Oxley Act, it does help in
strengthening the audit committees (Nguyen & Dai, 2019). A wide leverage is being received
by the audit committee, that does oversee the accounting decisions of top management. In an
audit committee, there is existence of board of directors, in which there is non-management
members do gain several responsibilities, and there is approving of several audit and non-
audit services. Furthermore, there is selection of the external auditors, and in handling
complaints related to the management accounting practices.
There is a change of the management’s responsibility in the Sarbanes-Oxley Act,
which is been reported in the financial reporting significantly. In performing the act, it does
require the top managers to certify the accuracy of financial reports. The organization does
force in making the accounting restatement which is been required to the accounting
restatement if there is any misconduct in the management (Gu & Zhang, 2017). As per the

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act, if the director or any officer is seen in violating any law, then it can be prohibited from
the position that individual hold at that organization.
The Sarbanes-Oxley Act does significantly strengthen the disclosure requirement. The
public organizations do require any disclosure of any material that is required for the off
balance sheet arrangements which does includes the operating leases and special purposes
entities (Chu & Hsu, 2018). The organizations need to disclose any statements that is been
undertook as per the generally accepted accounting principles (GAAP), in which there are
stock transactions to the Securities and Exchange Commission (SEC) that will be within the
business days.
Finally, with the help of Sarbanes-Oxley Act it does established the Public Company
Accounting Oversight Board, that does promulgate standards for the public accountants, and
do limit some of the conflict of interest, in which there requires a lead audit partner in every
rotation for the five years in that same public organization.

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References
Bhabra, H. S., & Hossain, A. T. (2017). The Sarbanes-Oxley act and corporate
acquisitions. Managerial Finance.
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.
Gu, Y., & Zhang, L. (2017). The impact of the Sarbanes-Oxley Act on corporate
innovation. Journal of Economics and Business, 90, 17-30.
Nguyen, K. L., & Dai Chu, D. (2019). Corporate Governance: The long term impact of the
Sarbanes-Oxley Act on Capital structure and Investment of firms. E| mporium, 1(2).