Views of management and accountants regarding the changes required by the Sarbanes-Oxley Act

Answer

The Sarbanes-Oxley Act of 2002

Introduction

             The passing of the Sarbanes-Oxley Act of 2002 by Congress was aimed at combating fraud, enhancing the reliability of financial reporting as well as restoring investor confidence in the business market. According to the Act, every firm is required to test its internal controls, sign the financial statements by the management, and to disclose required additional balance sheet activities (Herath & Walker, 2019). What’s more foreign will be required to extra costs to run their business. With this new change, managers, accountants, and investors expressed their views regarding their acts. Despite a few disparities, both shared the same sentiments on the impact of the Sarbanes-Oxley Act. Per the above statement, this essay will compare and contrast the views of managers and accountants on the Sarbanes-Oxley Act in correlation with the proposed changes and impact.

Changes and Effects of the Sarbanes-Oxley Act

The Act makes it a managerial duty to have adequate internal controls and also provides techniques to set them up. Management ought to disclose their responsibility and propose the suitability of internal controls as well as strategies in composing. As for the accountants, budgetary articulations review must be drafted and should be in line with the account of the administration's statement (Dah & Hurst, 2016). The act has also altered the relationship between the firms and the external auditor. Before the enactment of Sarbanes- Oxley, a few businesses relied on the external auditor to determine how complex accounting issues could be represented. This created an incompatible situation since the auditor surrendered freedom in assessing the organization's reporting, techniques, and controls (Duarte et al., 2014). As to the investors, the act relayed significant benefits but it was later established that the unnecessary cost that foreign firms had to pay discouraged investors.

Similarities on the views of the Management and the Accountants

Both managers and accountants felt that the Sarbanes-Oxley Act reduced their ability to extract value from their firms. The requirements in the Act were deemed unnecessary since managers had to factor in extra administrative costs that had little benefits. What’s more, this form of control to the managers or the shareholders from nations willing to liaise with the U.S. government or those coming from a nation with weak security systems would find the regime onerous (Dah & Hurst, 2016). Logically, most managers conjectured why they should be subjected to the same compliance burdens as those who have been dishonest or negligent. On other hand, accountants also feel that their freedom of evaluating the accounting processes of their firms is infringed. 

Differences in the views of the Management and the Accountants

While the management viewed the Sarbanes-Oxley Act as an expense to their operations, some accountants have been reportedly supporting the act. According to many accountants, having a Public Accounting Oversight Board, Exchange Commission, and Securities has helped in reducing monopoly of responsibility by the managers (Herath & Walker, 2019). Many managers have always taken the responsibilities of accountants especially in handling complaints directed to the management of accounting practices and overseeing external audits. But with the new act, the government also plays has a say in the audit services limiting managers who had fraudulent intentions on the finances of their companies.

Conclusion

In conclusion, the implementation of the Sarbanes-Oxley Act of 2002 has prompted the alteration of management and accounting responsibilities in all organizations within the U.S. Despite promising to combat illegalities especially the Act has raised different views among managers and accountants. To some extent, both these bodies believe that the policy demines their functional duties and impose unnecessary costs to a defined company. But accountants tend to support the rule since it ascertains integrity on a company’s financial statements and reduces the monopoly of responsibilities for the managerial body.