Is it possible to write comment on this auditing related written paragraph? If you agree or not agree please indicate and why. “The Sarbanes-Oxley Act was enacted in response to a number of major accounting scandals, including Enron, WorldCom, and Adelphia, among others. The legislation was drawn up in part to hold upper management accountable for the financial statements. The CEO and CFO must sign off on the financial statements and it was surprising to me that this was not required before 2002. Scandals had been occurring for decades without any accountability on the top management officials. I believe a law with this effect was long overdue by the time it was enacted, and even though scandals have not stopped since its inception its focus on accountability has been effective.
The PCAOB was created to keep an eye on the auditors, who were at the very least negligent in the scandals mentioned above. Arthur Anderson's involvement with the Enron scandal seems to go against nearly every ethical standard auditor and accountants in general should be held to. The fact that SOX created an independent oversight board was very beneficial, as the auditors tasked with overseeing the fraudulent companies were often guilty as well.
The effect of Section 404 can be seen in every 10-K report issued, when management assesses its system of internal controls and the auditor opines on that assessment. This requirement has made it very easy to find in the annual report, out in the open in its own section. It invests management in their controls, whereas earlier management could essentially run wild with little accountability.
The other part of SOX that stood out to me was the protection of whistle blowers. It is often very difficult for knowledgeable employees to whistle blow as they fear the repercussions by those they perceive to be more influential. By outlining punishment explicitly for harming whistle-blowers SOX made it easier for those with information to come forward and blow the whistle, which is the most effective way to report fraudulent activities.” Express your opinion.