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)

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

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

4. Tom Jackson is a CPA who really likes to go to Las Vegas, play poker, and bet on football games. Tom knows that the accounting profession disapproves of gambling, but because he spends a lot of time studying sports facts and how to win at poker, he feels that he is simply making educated decisions based on facts. He says that this is no different from using accounting information to buy stocks. Use the fraud triangle as a basis to comment on Tom’s gambling activities. (15 points)

1,2,3) “The Enron and WorldCom accounting scandals had such devastating effects that they led congress to pass the Sarbanes-Oxley Act of 2002 (SOX). SOX requires public companies to evaluate their internal control and to publish those findings with their SEC filings. Internal control is the process designed to ensure reliable financial reporting, effective and efficient operations, and compliance with applicable laws and regulations. Safeguarding assets against theft and unauthorized use, acquisition, or disposal is also part of internal control.

Section 404 of Sarbanes-Oxley requires a statement of management’s responsibility for establishing and maintaining adequate internal control over financial reporting by public companies. This section includes an assessment of the controls and the identification of the framework used for the assessment. The framework established by The Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 1992 is the de facto standard by which SOX compliance is judged. COSO’s framework titled Internal Control––An Integrated Framework recognizes five interrelated components including:...