Impact of Sox Act on Auditing

The Impact of the Sarbanes-Oxley Act on Auditing

Dyane Johnson

Strayer University

ACC 403

Professor Randolph Stanley

November 22, 2011

Abstract

This paper will briefly discuss the effect of the Sarbanes-Oxley Act on services outside the scope of practice of auditors and as auditing as a whole. The Sarbanes-Oxley Act of 2002 laid out new guidelines defining auditor independence, corporate responsibility, and fraud accountability. Some of the changes for auditors that came along with the new regulation prohibited certain activities that auditors may have been performing for their clients. Some of the prohibited activities include: bookkeeping (financial services), management/human resource functions, and appraisal/valuation services.

The Impact of the Sarbanes-Oxley Act on Auditing

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Examine an auditing issue that is impacted by Sarbanes-Oxley

Congress passed regulation in 2002, after the failure of big businesses like WorldCom, to help minimize financial statement manipulation and corporate improprieties. (Banks, 2003) Auditors, before Sarbanes-Oxley was passed, had been able to perform multiple tasks for a client of theirs. Clients seeking an auditor took advantage of auditors that had multiple talents. Instead of paying for an accountant, a human resource manager, and a tax professional, companies were signing a single auditor or auditing firm to handle all of their financial needs. This may have proven to be less costly or more efficient to the companies, but this all-in-one deal proved to be a disastrous combination for customers, stakeholders, and the accounting field. One auditing issue that has been impacted by Sarbanes-Oxley is auditor independence, namely, the services outside of the scope of practice of auditors. Independence is a crucial factor in auditing. Clients and users of financial reports expect the auditor to provide an honest opinion about a company, so they may make a decision that will best benefit...