Introduction
Auditing is an important process that is followed to guarantee that financial statements prepared by any company are accurate, and internal controls have been applied effectively. Therefore, auditors are third parties that need to be impartial to provide fair and appropriate conclusions. The role of auditors is to prevent the situation when companies report inaccurate or falsified information regarding their financial position (Epstein, 2014). The Sarbanes Oxley Act was established in 2002 to make organizations add an Internal Controls report to their financial documentation to ensure that the reported data are accurate (Franklin, 2016). The purpose of this paper is to explain what activities are typical of auditors during an auditing process and what requirements are associated with the Sarbanes Oxley Act.
The Role of Auditors
When auditors come to conduct a firm-wide audit, it is expected that they will examine all the issues related to internal controls to test the accurateness of making financial statements. The focus is on determining whether financial reports include correct data and how effectively they are arranged to reflect a real financial state of a company following governmental requirements (Franklin, 2016). One of the main tasks of auditors is to determine any cases of misinformation in financial statements. From this perspective, the role of an auditor is to check the accuracy of the financial records of an organization and confirm their compliance with specific laws (Epstein, 2014; Udeh, 2016). There can be unintentional errors and intentional manipulation of data to affect investors’ decisions. Such types of mistakes are also found by auditors in order to conclude regarding the aspect of integrity in relation to a firm’s operations (Udeh, 2016). This analysis should be conducted according to the requirements of the Sarbanes Oxley Act of 2002.
The Requirements of the Sarbanes Oxley Act
It is important to note that auditors pay much attention to determining whether a company’s financial documents are filled in accordance with the principles and requirements of the laws. Being in line with the principles of the Sarbanes-Oxley Act, it is required that managers in organizations should include the internal controls statement in their financial documentation (Epstein, 2014; Udeh, 2016). Following this requirement, it is possible to ensure that all the presented financial data are accurate and not false, allowing for the 5% modification or variance of the presented information (Franklin, 2016; Udeh, 2016). Therefore, following the principles reflected in Section 404 of the Sarbanes-Oxley Act of 2002, auditors are expected to evaluate a firm’s internal controls, as well as the aspect of management integrity (Franklin, 2016). Other important sections to provide the requirements for firms and auditors to follow are Section 302 and Section 409.
Conclusion
One should note that an auditing process is of critical importance because it is aimed at guaranteeing that all the financial data presented by organizations are correct and valid. According to the principles and requirements of the Sarbanes-Oxley Act, auditors are required to examine internal controls in a firm to focus on management integrity. The analysis of this information allows for concluding regarding the quality of data that are presented in a company’s financial statements. As a result of auditing, the investors of a firm become ensured that all the data provided in financial records are correct and not misleading.
References
Epstein, L. (2014). Financial decision making: An introduction to financial reports. Bridgepoint Education, Inc.
Franklin, M. (2016). Sarbanes-Oxley Section 404: A historical analysis. Journal of Accounting and Finance, 16(4), 56-69.
Udeh, I. A. (2016). Auditor changes in the SOX era. Journal of Accounting and Finance, 16(5), 123-133.