Organization and

rules that Govern the

Accounting
Profession
Presentedby:
NickRoss,LaraPachecoandShaunaHaylock
BE104:IntroductiontoAccounting

What is SOX?
SOX stands for Sarbanes-Oxley Act
Generated in 2002
Formed due to malpractices in the accounting field
SOX obliges senior managers to verify all financial
statements

SOX calls for managers and auditors to institute

internal controls and various reporting methods

SOX also requires the IT department to store records

The Role of SOX

It improved the corporate board of directors
Calls for companies to follow a code of ethics
SOX formed PCAOB Public Company Accounting
Oversight Board

SOX compliance makes public companies more

expensive to run

Changed the practices of many private

companies also although they are not required
to operate under SOX.

Enron Scandal
The Auditing Firm Arthur Anderson was falsifying
Enrons financial documents

Investors lost some 60 billion dollars within a few days

The pension fund for the companys employees was
obliterated

Losses on the financial market amounted to the worst

stock value loss in history at the time

Arthur Anderson lost its license to practice accounting

The financial world of accounting was changed forever

Worldcom Violation
Very negative impact on telecommunication
market

Thousands of employees lost their jobs

Significant decline in the price of other
telecommunication companies shares

https://www.youtube.com/watch?
v=WUNk12uv9PQ

Accounting Principles
Accounting Principles are the rules and guidelines that companies
must follow when reporting financial data.

Accrual principle
Conservatism principle
Consistency principle
Cost Principle
Economic entity principle
Full disclosure principle
Going concern principle
Matching principle

Conservatism Principle
When a business should report the least
favorable figures in the financial statements
when two or more possible options are present.

Full Disclosure Principle

When a business financial statements must
report enough information for outsiders to make
knowledgeable decisions about the company.

Roles of Auditors
InternalAuditors
Theyarecompanyemployees
Theyareresponsibleformanagement
Theyexamineissuesrelatedtocompanybusinesspractices
andrisks

Internalauditreportsareusedbythemanagement

Roles of Auditors
ExternalAuditor
Theyworkforanoutsideauditfirm
Theyareresponsibletotheshareholders
Theyexaminethefinancialrecordsandissueanopinion
regardingthefinancialstatementsofthecompany

Externalauditreportsareusedbystakeholders,suchas
investors,creditorsandlenders.

Accounting Ethical Issues

and Solutions
Issues
Stayinguptodatewiththemanyfrequentlyaddedregulations
Violationoftheaccountingprinciplesresultsinthelegalviolationby
thecompany

Solutions
Accountantsstayinguptodateonallproceduresandrelevant
information

Companieshiringcreditableaccountantstoaudittheirfinancial
statement

References
ConsequencesoftheENRONScandal.(n.d.).Retrieved
November30,2016,from http://
www.globalethicnow.de/geneng
/0d_weltethosundwirtschaft/0d01globalewirtschaft
/0d01203enronfolgen.php

Morris,A.,Nathan,D.,&Ayr,A.(2016,November3).

BrokerDealersandTheirAuditorsFaceIncreased
RegulatoryScrutiny.RetrievedNovember30,2016, from
http://
www.bna.com/brokerdealersauditorsfacen57982082186/