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The research and fraud case, Enron
As a product of the investigations carried out by the United States Congress, on the fraud of Enron, several measures were proposed, which became the Sarbanes-Oxley law (Sarbanes Oxley Act). This law is designed to regulate accounting, financial and audit activities. In addition, to punish severe penalties and catalog it as corporate crime. What is sought, that companies have a system of internal, monitoring and prevention controls to guarantee the integrity and precision of financial reports. It also normalizes the ethical behavior of business responsibilities, with new strict guides to penalize and prevent business fraud and corruption acts. According to Rodríguez & Milena, "As for the Sarbanes Oxley law, it is mandatory by companies that are listed in the Stock Exchange and regulated under the SEC," includes native United States companies, such as foreign companies.
The law requires, according to Rodríguez & Milena, “all companies must have a financial and audit committee which must be composed of directors and/or persons external to the administration, in order to guarantee that there are no conflicts of interest over theCompany decisions, as well as professional skepticism in review procedures ”. Similarly, audit signatures are regulated by the PCAOB-Public Company Accounting Oversight Board, who standardizes the methodology applied in audit procedures and regulates compliance, in order to ensure its independence and avoid conflict of interest, generating aClean and reliable opinion. In addition, Rodríguez & Milena argues, “the SOX law is obliged to make the financial statements audited and evaluate the internal financial control. With it, PCAOB demands that audits and companies have properly documented and supported controls with relevant evidence that allows to define its proper design and operation ”.
For financial reports, the audit must be accompanied by opinions, established by the Sarbanes Oxley law. These observations, according to Rozen, are: “The assertions that the company’s administration (CEO and CFO) makes about the effectiveness of internal control in the preparation of financial information at a certain date. Report that there are no material weaknesses in internal control to the date on which the company’s administration made its assertions. If there are significant deficiencies and material weaknesses, report them ". The intention is that the audit reflects the confidence that must exist by companies. Part of internal control audits must reflect in financial reports, the following: Through control objectives, the importance of protecting authenticity in statements. As for risk, according to Rozen, “the risks in terms of their probability and impact in order to reasonably eliminate the contingent production of errors and fraud should be mitigated. A risk is lowered with one or more control activities ". In control activities, for Ranz (2008), “they are manual or automated, detective or preventive tasks and actions, which try to mitigate a particular risk to facilitate compliance with the control objectives. Key control activities or "Key Controls": are those controls that alone manage to eliminate the risks of not achieving control objectives ".
As soon as the assertions, according to touch, “the assertions are the statements that the company’s management makes about the components of the financial statements (accounts or items). These assertions must be evaluated by the company and the auditor based on the following classification: o totality, completeness or integrity: that any transaction, events or circumstances occurred during a specific period have been recognized and recorded accounting in said period in that period. Existence or occurrence: that the assets, liabilities and investment of the shareholders exists at a certain date and that the registered operations represent events that really occurred during the period in question. Rights and obligations: that the assets are real stocks and rights of the company and that the liabilities are truth obligations at a certain date. Valuation: That the assets, liabilities, income and expenses have been registered in accordance with the generally accepted accounting principles and that said transactions are mathematically correct and properly registered ”.