ACCT 301 Week2 Homework
ACCT301
Week 2 Homework
1. In two to three paragraphs, describe the Sarbanes-Oxley Act and why it is important to the accounting profession. (15 points)
Sarbanes-Oxley Act was created in order to ensure that controls were implemented and monitored by the regulating authority. Congress wanted to make sure that there was a specific standard and guideline for companies to follow in order to prevent fraud at such a large scale. When followed correctly there are controls set in place that are internal which are governed by the managers and checked upon by the Federal regulatory authorities.
This act was passed in 2002, prior to then the rules were more relaxed and when the crisis occurred with Enron that was a breaking point for the American people, especially those who lost a lot of money. Needless to say this just made it harder for fraud to occur. There were and still are several grey areas that the players involved exploit.
2. Name and briefly describe the five components of COSO’s internal control framework. (10 points)
The five components of COSO are as follows:
a. Control Environment: Basically means that the leaders of the organization set the tone for ethics and enforce them with a code of conduct followed by consequences when not abided by.
b. Risk assessment: this just means they check there controls for weaknesses regularly and fix any discrepancies with stronger controls.
c. Control activities: These are segregation of duties, account reconciliations, and info processing controls. They are considered internal controls as well that protect the processes in place.
d. Information and communication: The internal and external reporting process. The text book stated that it includes technology assessments as well.
3. Describe the relationship between the Sarbanes-Oxley Act and COSO. (10 points)
COSO is used to check in on the organizations and offer guidelines for them to follow when setting upo their controls. If all five elements are
Week 2 Homework
1. In two to three paragraphs, describe the Sarbanes-Oxley Act and why it is important to the accounting profession. (15 points)
Sarbanes-Oxley Act was created in order to ensure that controls were implemented and monitored by the regulating authority. Congress wanted to make sure that there was a specific standard and guideline for companies to follow in order to prevent fraud at such a large scale. When followed correctly there are controls set in place that are internal which are governed by the managers and checked upon by the Federal regulatory authorities.
This act was passed in 2002, prior to then the rules were more relaxed and when the crisis occurred with Enron that was a breaking point for the American people, especially those who lost a lot of money. Needless to say this just made it harder for fraud to occur. There were and still are several grey areas that the players involved exploit.
2. Name and briefly describe the five components of COSO’s internal control framework. (10 points)
The five components of COSO are as follows:
a. Control Environment: Basically means that the leaders of the organization set the tone for ethics and enforce them with a code of conduct followed by consequences when not abided by.
b. Risk assessment: this just means they check there controls for weaknesses regularly and fix any discrepancies with stronger controls.
c. Control activities: These are segregation of duties, account reconciliations, and info processing controls. They are considered internal controls as well that protect the processes in place.
d. Information and communication: The internal and external reporting process. The text book stated that it includes technology assessments as well.
3. Describe the relationship between the Sarbanes-Oxley Act and COSO. (10 points)
COSO is used to check in on the organizations and offer guidelines for them to follow when setting upo their controls. If all five elements are