Sarbanes-Oxley (SOX Audit)

Sarbanes-Oxley (SOX Audit)

1. Legislation passed in wake of accounting sandals (Enron, Wordcom, Tyco, Sunbeam)
2. Failure by public accountants to be objective and independent
3. Emphasis placed on need for effective internal control

SOX Audit

SOX aims to restore investor confidence and enhance corporate governance by using a series of checks and balances. The goals is to ensure transparent financial reporting

• Section 302 and 906 - Threatening management with a big stick
• Section 404 - Ensuring a healthy immune system. That is Companies to build up an internal control system that is checked by CFO and CEO, and then by external auditor

Objective of Internal Control

To provide reasonable assurance that:

1. Assets are safeguarded and used for business purposes ONLY
2. Business Information Accurate
3. Employee comply with rules and regulations

Five elements of Internal Control

• The control environment
• Risk assessment
• Control Procedures
• Monitoring
• Information and Communication