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Compliance Issue Essay

Ethical Dilemma on Enforcing the Sarbanes-Oxley Act As the controller of a medium-size manufacturing company, I have developed an effective accounting and internal control systems. This has been achieved through keeping the staffs updated on changes in the accounting industry and diligently updating the systems to comply with new accounting standards. As a result, the company has been regularly complimented for thorough procedures by the external auditor who has been reviewing its books for more than a decade. However, the enactment of the Sarbanes-Oxley Act has initiated several changes and extra work for the firm because it focuses on testing internal control systems. Based on their interpretation, the auditors have suggested costly improvements to the systems and expanded the scope of the audit engagement, which contributes to increased fees. The partner in charge has stated that it is better to make mistakes in implementation rather than risk non-compliance since the new legislation is open to interpretation.

This situation has contributed to an ethical dilemma based on the belief that the company is in...

The ethical issue in this situation is whether to change auditors because the current ones are too strict in enforcing the Sarbanes-Oxley Act.
According to John & Marano (2007), the enactment of this legislation has resulted in numerous compliance challenges for both small and mid-sized public firms. The challenges in compliance are brought by the disproportionate and huge regulatory burden associated with the Sarbanes-Oxley Act. Given the increased vulnerability to prosecution and shareholder lawsuits, external auditors usually conduct extensive testing of every internal standard and procedure to protect themselves from such instances. Notably, the extensive testing is carried out regardless of its probable significant impact on the accuracy of financial statements.

Therefore, changing auditors because of the strictness of the current one may not be a suitable course of action to address the situation. This is mainly because most of the existing auditors employ stringent measures when carrying out their duties in order to…

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Works Cited

John, David C., and Nancy M. Marano. "The Sarbanes-Oxley Act: Do We Need a Regulatory or Legislative Fix?" The Heritage Foundation. The Heritage Foundation, 16 May 2007. Web. 29 Sept. 2014. <http://www.heritage.org/research/reports/2007/05/the-sarbanes-oxley-act-do-we-need-a-regulatory-or-legislative-fix>.

McCarthy, Ed. "Tips for the Sarbanes-Oxley Learning Curve." Journal of Accountancy (2004). Journal of Accountancy. American Institute of Certified Public Accountants, June 2004. Web. 30 Sept. 2014. <http://www.journalofaccountancy.com/Issues/2004/Jun/TipsForTheSarbanes-OxleyLearningCurve.htm>.
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