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Sarbanes-Oxley Act Of 2002: The Role Of Ethics In Accounting

619 Words3 Pages

Because accountants are one of the most trusted professions and are essential personnel with access to confidential financial information, ethics in accounting is a crucial subject. Ethics and ethical behavior refer to values like morality, honesty, and integrity. Ethics guide the behavior of accountants and financial professionals in their roles. Ethics are essential in accounting to ensure financial information is accurate, reliable, and transparent. Ethics in accounting is important for several reasons. Confidentiality is very important when dealing with financial information. Again, accountants are highly trusted professionals, and it is important that they can be dependable and responsible to keep financial information private. Investors, creditors, and shareholders heavily rely on financial reports to be correct in order to make informed decisions. …show more content…

Due to fraud in financial reporting, the Sarbanes-Oxley Act of 2002 was passed to restore the confidence in the accounting profession, by lowering corporate scandals and unethical behavior. The act requires upper management to certify the responsibilities of the financial statements, including ensuring proper internal controls, supervising the audits of such reports, and ensuring the accuracy in those reports. SOX also increased penalties for fraudulent financial activity and increased independence for auditors. The Financial Accounting Standards Board (FASB) was established in 1973 to form standards for accounting and reporting standards for public and private companies and for non-profit organizations that follow Generally Accepted Accounting Principles (GAAP) in the United States. (FASB, 2023). It is made up of seven members that are appointed by the Financial Accounting Foundation Trustees and the members generally serve five years terms with a maximum of up to ten

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