Acct301 Week 2 Homework

ACCT301

Week 2 Homework

1. In two to three paragraphs, describe the Sarbanes-Oxley Act and why it is important to the accounting profession. (15 points)

The Sarbanes-Oxley Act, or SOX, was passed in 2002 was created to hold publicly traded companies to standards when auditing. This was a solution to a problem because companies such as Enron, Worldcom , and Tyco were committing accounting fraud. With the SOX act there was a standardized auditing methods which all companies now follow.

The biggest problem of course was the cost in which it would take to implement SOC but what came from it seems to have worked. With standardized auditing companies can no longer break the law as easily and were held accountable. What also happened was it eased the people, knowing their jobs were safe and could not be taken over night, and this was for everyone, lets people sleep easy.

2. Name and briefly describe the five components of COSO’s internal control framework. (10 points)

The five elements of COSO's are Control Environment, Risk assessment, Control activities, Information and Communication, and Monitoring. Control Environment is about creating a atmosphere in which there can be no mistake or even the ability to mess up. Risk assessment is creating a list of the biggest risks, then figuring out a way to remove or reduce them. Control Activities is creating a procedure in which a company would require more than a single member to sign off on or agree to a solution or money ventures. Info. and Comm. is about filling and keeping track of anything and everything that would pass through the company to keep track of all and once again any assets. Lastly Monitoring is being able to keep track of and upgrade controls asserted over the company as to keep them fresh and updated.

3. Describe the relationship between the Sarbanes-Oxley Act and COSO. (10 points)

The relation ship between the two is simple. While...