Иқтисодий таҳлил ва аудит

MANAGEMENT AND AUDITOR RESPONSIBILITY

When preparing the financial statements, management must follow GAAP, which are the principles and practices that govern financial reporting. Formal statements on financial accounting standards are issued by the Financial Accounting Standards Board, an independent standards setting organization in the United States. When financial statements of an entity are presented to the external auditor for a financial audit, the entity's management asserts that the financial statements are prepared in accordance with GAAP. Based on their audit, the auditors are responsible for rendering an opinion on whether the financial statements have been presented in accordance with GAAP in all material respects. To promote independence and objectivity, the audit committee of the company's board of directors is responsible for selecting and hiring the external auditors. In this role, the audit committee also acts as a liaison with the auditors who are performing the financial statement audit.

THE SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission (SEC) was established by Congress in 1934 to enforce the Securities Exchange Act of 1934. The act requires publicly held companies to file annual audited financial statements (on Form 10-K) with the SEC. While not required by the act, nonpublic companies may also have their financial statements audited for several reasons. For example, the company may be planning to go public in the near future for which it will need audited financial statements for several previous years. Banks or other creditors may also require audited financial statements annually. Finally, a business may voluntarily hire an auditor to provide the owners with some assurance that its financial statements are reliable.

SARBANES-OXLEY ACT OF 2002

A significant number of high-profile business scandals (e.g., Enron, Tyco, and WorldCom in the United States, and Parmalat and Royal Ahold in Europe) that resulted in the restatement of previously issued financial statements early in the twenty-first century eroded investor confidence worldwide. Consequently the U.S. Congress responded by passing the Sarbanes-Oxley Act (SOX) of 2002 in an attempt to restore investor confidence.
An important aspect of SOX is that it increases the regulation of the external auditors at publicly traded companies. In addition, SOX has designated the SEC as the body to enforce the provisions of the act. The SEC has delegated the oversight of external auditors to the newly created Public Company Accounting Oversight Board (PCAOB). According to Section 103 of SOX, the PCAOB shall:
(1) register public accounting firms; (2) establish, or adopt, by rule, "auditing, quality control, ethics, independence, and other standards relating to the preparation of audit reports for issuers;" (3) conduct inspections of accounting firms; (4) conduct investigations and disciplinary proceedings, and impose appropriate sanctions; (5) perform such other duties or functions as necessary or appropriate; (6) enforce compliance with the Act, the rules of the Board, professional standards, and the securities laws relating to the preparation and issuance of audit reports and the obligations and liabilities of accountants with respect thereto; (7) set the budget and manage the operations of the Board and the staff of the Board. (http://www.aicpa.org/info/sarbanes_oxley_summary.htm)
In essence, this section of SOX provides for government regulation of the audit profession and it represents one of most dramatic changes mandated by the new law.
Other changes mandated by SOX have significantly affected external auditors. For example, Section 404 of SOX mandates that all publicly traded companies include in their annual report an assessment made by management about the effectiveness of their internal controls and procedures for financial reporting purposes. SOX also requires that the company's independent auditors attest to and report on management's evaluation of their internal controls and procedures.
Section 302 of SOX mandates that the chief executive officer (CEO) and chief financial officer (CFO) of each publicly traded company prepare a statement to certify the "appropriateness of the financial statements and disclosures contained in the periodic report, and that those financial statements and disclosures fairly present, in all material respects, the operations and financial condition of the issuer" (http://www.aicpa.org/info/sarbanes_oxley_summary.htm). If CEOs or CFOs knowingly and intentionally violate Section 302, they can be held criminally liable. And, under Title IX of SOX, the penalty for filing false financial statements with the SEC "for willful and knowing violations" are "a fine of not more than $5,000,000 and/or imprisonment of up to 20 years" (http://www.aicpa.org/info/sarbanes_oxley_summary.htm). For external auditors, this section of SOX has dramatically increased the attention being focused on the financial statement reporting process.