Discuss the Sarbanes-Oxley Act. What effect has it had on companies’ auditing processes? In what was has this affect been a positive one?

According to Kimberly Amadeo (2018) from the balance, the Sarbanes-Oxley Act created the Public Company Accounting Oversight Board (PCAOB). The purpose of PCAOB was to monitor auditors to make sure they did their jobs correctly. It also set the standards for auditor reports; the board would be the one that would inspect, investigate, and enforce the rules of regulations auditors are supposed to follow in order to make a unbiased and factual report. One crucial part in ensuring unbiased opinion is the fact that the PCAOB requires lead auditors partners to rotate off the account every five years. This feature is very important because it implements a “checks and balance” system. Similarly to companies requiring their employees to take mandatory vacations, auditors are then subjected to having their work checked by an objective entity if they were directed to step down every five years . This guarantees that auditors are providing unbiased opinions about certain companies.

If the Sarbanes-Oxley Act was not created much less did not create the PCAOB, companies and accountants would not be any better than before the act was enacted because it still allowed bad influences to corrupt firms. Subsequently, if a company was audited, the lead auditor may be inclined to look away at bad business practice and give biased opinions.

Altogether, the Sarbanes-Oxley Act has been very positive in the fact that it did create the Public Company Accounting Oversight Board (PCAOB).

Reference:

Amadeo, K. (2018, August). Sarbanes-Oxley Summary – Four Ways Sarbanes-Oxley Stops Corporate Fraud. the balance, (), . Retrieved from https://www.thebalance.com/sarbanes-oxley-act-of-2…