The Sarbanes-Oxley Act Overview:
The development of the Sarbanes-Oxley Act (SOX) was a result of public company scandals. The Enron and Worldcom scandals, for example, helped investor confidence in entities traded on the public markets weaken during 2001 and 2002. Congress was quick to respond to the political crisis and "enacted the Sarbanes-Oxley Act of 2002, which was signed into law by President Bush on July 30" (Edward Jones, 1), to restore investor confidence. In reference to SOX, penalties would be issued to non-ethical or non-law-abiding public companies and their executives, directors, auditors, attorneys, and securities analysts (1). SOX significantly transformed the procedures in which public companies handle internal controls and reporting within accounting and finance and the managerial aspects of public companies (2). Among the many objectives of SOX the most important objective is to oversee public accounting, publicly reporting companies, and the investment industry; however, SOX needed assistance in order follow through with these objectives:
To better observe the actions of public accountancy, SOX has established the Public Company Accounting Oversight Board. This board oversees the accounting profession and publicly reporting companies with respect to audits and other reporting. It also has created rules designed to assure that auditors of publicly reporting companies are independent of the companies on which they report (3).
The Public Company Accounting Oversight Board (PCAOB) employees are required not to have any direct relationships with the public companies and/or employees of the companies in order to keep all terms of accountability fair. Title I of the Sarbanes-Oxley Act describes the role of the PCAOB who is no ...