3.3 Finanical Reporting and Accounting

How does the Sarbanes–Oxley Act contribute to accurate and quality financial reporting by public corporations? Why is the act considered an excellent example of public corporations meeting a key ethical standard? To support responses, provide examples of companies that were negatively affected by a lack of ethical guidelines.

From the article below,  1)   What caused the SEC to question EY's independence? 2). Explain the findings in the history for EY's other instances where its independence was called into question.  Accounting reform occurred after significant corporate misconduct was discovered in the early 1980s. Some of the reform sought to require public companies to put the hiring and pay of their auditors in the hands of an independent audit board committee. There has been concern that management still has significant influence on the evaluation and final decisions. Phillip Lamoreaux, an accounting professor at Arizona State University, conducted a study of more than 2,000 auditor changes in publicly traded companies. He found that companies whose top executives had worked with a Big Four accounting firm were twice as likely to select that firm. Many executives make their way into corporate America through the largest accounting firms in the world. A chief accountant in the Securities and Exchange…

Section 404 of the Sarbanes-Oxley Act of 2002 (SOX) requires that O public companies disclose if they have adopted a code of ethics for its senior officers. O management of public companies recognize their responsibility for establishing internal controls and provide an assessment of the effectiveness of those internal controls. O public and private companies disclose if they have adopted a code of ethics company-wide. O CEOs and CFOs of publicly traded companies certify the accuracy of their reported financial information.

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Which of the following is a provision of the Sarbanes-Oxley Act? a. Lessens penalties for corporate fraud b.Developed the Consumer Financial Protection Bureau c. Recommends codes of ethics for financial reporting in corporations d. Makes fraudulent financial reporting a civil offense e.Requires greater transparency in financial reporting