April 5, 2015
The following acts in the following article called “Becoming a More Relational Firm in the Post-Sarbanes-Oxley Era” have led to unethical practices and behavior in accounting. These practices and behaviors are a violation of the Sarbanes Oxley Act of 2002 (SOX). According to the acritical, the effects of SOX have changed companies that use auditing services as their main source of business (Jelinek, Jelinek, 2010). Agencies have been having a hard time obtaining clientele since the SOX act. The SOX act has changed provisions that disallow an agency to sell services directly to company personnel (Jelinek, Jelinek, 2010). This has resulted in agencies having to go outside committees to sale services or products (Jelinek, Jelinek, 2010). This act also requires the auditor agencies to resale the services after five years and disallows them to seek employment with a previous clients within a year of the last audit (Jelinek, Jelinek, 2010). Agencies now have strict rules with their operation procedure because of these new rules. The information that is reported in this article makes it clear that auditing agencies are having a hard time rendering services and companies are resorting to using internal auditors. Using internal auditors has caused a rise in the unethical and behavioral practices within the company, such as the misuse of funds, meaning funds that have been used towards something that was not authorized. In addition, if a company uses funds from one area to cover the lack of funds for another area or not reporting a debt or liability on their financial statement are unethical practices and behaviors. These unethical practices and behaviors makes the companies look better by making the debt to income ratio more favorable. This gives investors, creditors, and stockholders a false picture of financial health. In summary, this article has given information about the changes in methods that auditors have had to make to become compliant with the SOX act. Auditors are having a harder time rendering clients because companies are now resorting to using internal auditors to avoid the changes that have been made. Because of this, companies are finding that they have a higher risk of unethical practice and behavior and this can cause long-term effects. Hiring and outside auditor will be able to catch the misuse of funds or the lack of reporting, this will only make an improvement in their accounting practices.
Jelinek, K., & Jelinek, R. (2010). Becoming a more relational firm in the post-sarbanes-oxley era. The CPA Journal, 80(9), 64-67. Retrieved from http://search.proquest.com/docview/756960959?accountid=458
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