Your long-time client, Colorado Company, has been growing fast, prompting the board to consider taking the company public. CEO Billy Jean has heard that due to the Sarbanes–Oxley Act, costs have increased significantly when operating a public company. Jean is especially apprehensive with reports that he can anticipate double the audit fees due to the internal control provisions of the Act and PCAOB Auditing Standard No. 2201. Jean has asked you to explain how the Sarbanes–Oxley requirements may affect the audit.
Required:
Organize and share your thoughts if the company decides to go public. How would complying with the Sarbanes–Oxley and PCAOB Auditing Standard No. 2201 change the company’s responsibilities for internal control? Then use your thoughts to:
- Describes the changes in internal controls (due to PCAOB and Sarbanes-Oxley standards) needed once they become a public company.
Your deliverable should be 3-4 pages in length. Please type your response in a Word document and follow APA format, according to CSU Global Writing Center (Links to an external site.). Include a title page and reference page. Use two (2) outside academic sources other than the textbook, course materials, or other information provided as part of the course materials.
Requirements: 3-4 Pages not counting cover or reference pages
Answer preview
The Sarbanes-Oxley Act is an active law passed in 2002 by the U.S Congress to protect investors and shareholders from fraudulent reporting of financial results of public companies. The Act brought strict reforms to securities regulations. It also imposed harsh penalties on companies or individuals who break the new and the already existing regulations. In the 2000s, many financial scandals became rampant where publicly traded companies were in the spotlight. Some companies such as Tyco International plc, Enron Corporation, and WorldCom were involved in severe fraudulent activities that shook investors ‘confidence (Kenton, 2020). The trustworthiness of public companies’ financial statements was also shaken, forcing the amendment of more than decade-old financial regulatory standards.
[1011 Words]