Sarbanes-Oxley Act, Sarbox or SOX as it also commonly known as is an act of the American federal law which was promulgated in the year 2002. The act was presented by Democrat Senator Paul Sarbanes and Republican senator Michael Oxley and hence has been named after them. The core idea behind the designing of this act has been to provide the corporate sector of the country and acquaint them with the issue of Corporate and Auditing Accountability and Responsibility. (Cohan, 2002)
An important question that arises here is the need which necessitated the promulgation of such an act in the country. There is a simple reason behind this. Within the last couple of years before the act was enacted American economy and corporate sector suffered massive blows in its economic landscape, primarily due to the scandalizing corporate scandals and counterfeiting cases that it experienced. Some of the cases that became the center of international attention were Enron, Worldcom, Adelphia and Tyco International.
From the analysis of the importance of fraud in the business community, international institutions have decided to regulate legal practice. These changes in the laws have so changed the place of the auditor. The purpose of this paper is to explore the place auditors now have in corporate failures and whether they are to be solely blamed for it.
The statutory auditor has always been expected to have an indirect role in the prevention of fraud within the organization he works for. The internal auditor of the trade is thought to be responsible for ensuring internal controls within a company. According to the proper definition Internal Audit is an independent, objective organization that gives an assurance on the degree of control of its operations, it provides advice for improving and contributes to create value added. The internal auditors at Campbell detected that $150,000 revenue had been included in 2010 revenue to meet the budgeted revenue and earning amount of that year. This is a concern that Cupertino should not ignore as the report made by him is submitted to shareholders and published in the form of a draft. The mission objectives and means of statutory audit can include users of financial statements, investors, shareholders, employees, creditors, other business partners to have reliable information on any approaching economical state or crisis. They thus aim to reduce asymmetry of information between economic agents. The mission of the auditor is permanent, and includes obligations to shareholders. In return, the auditors have two powers which the right of information and investigative powers. (Fritzsche, 2000)
His estimates are based on the objectives of good governance and the literature's and apparent strengths and weaknesses. It describes the tests that audits will be deployed to carry out the mission.
Regain market confidence will be a long and difficult process. This will require a more transparent and relevant information, and from this point of view, companies and boards should probably rethink their financial and non financial to take greater account of what really matters to shareholders. In this regard, the Edelman Trust Barometer for 2010 shows the evolution of mind from 2006 to 2010: financial performance, which came in third position in the criteria of good reputation of a company goes into 10th position. Is transparency and honesty coming in first place (with a rate two times greater than that attributed to the financial performance).
But when it comes to information, one should mention the role of auditors all over the world who are agents of confidence to investors: their function is indeed to certify that the financial statements or statements are and accurate and fairly present the results of operations for the past year, Heritage and the financial situation of the company (or all the companies included in the consolidation) at the end of this year.