ACC618 Week 6 Discussion 2 Sarbanes-Oxley

Based on our discussions and readings over the past few weeks, we know that Section 404’s intent is to have publicly traded companies attest to the adequacy and effectiveness of their internal control structure and procedures for financial reporting in their annual report. Management has asserted that the company has internal controls in place, that they are operational and effective, and that any deficiencies in the internal controls must be reported promptly; external auditors must confirm that these assertions are accurate. With this in mind, we’ve also discussed how auditors must act in the public interest when fulfilling their duties, and how maintaining their independence and objectivity are essential to doing so.

An external auditor can only do a good job if they have access to accurate information from the company’s internal accounting and auditing departments and management. There should be no cause for legal action as long as the external auditors establish a thorough audit scope and collect all the data, they need to issue an unqualified opinion. To guarantee that internal controls are fully functional and effective and that no unethical behavior is occurring within an organization, an external auditor must conduct thorough and appropriate testing. The external auditor must notify the appropriate parties to push for the information needed to issue a clean opinion if the company is not providing the information required to certify the company’s assertion of internal controls or if material deficiencies are found during the audit.

Finally, auditors should plan their audit scope according to GAAP/GAA’S standards and check that they are following the ethical codes established by the AICPA, the PCAOB, and the SEC to ensure that they are conducting audits professionally and without violating any guidelines. The auditors must issue a qualified opinion explaining why they cannot provide an unqualified opinion on management’s assertion of internal controls in order to avoid liability in the event of litigation.

References

Mintz, S. M., & Morris, R. E. (2014). Ethical obligations and decision making in accounting: Text and cases (3rd ed.). Retrieved from https://www.vitalsource.com