Critically evaluate the importance of regulator

More Essay Examples on Enron Rubric The role of the regulator is to promote understanding by the public of the securities and futures industry and the benefits, risks and liabilities associated with investing in financial products hence the importance of making informed decisions regarding transaction or activities related to financial products and to take responsibility. Different countries have developed their own accounting principles over time, making international comparison of companies difficult.

Critically evaluate the importance of regulator

It is a pleasure to be celebrating the first day of spring with you and your accounting students and colleagues here at the Kogod School of Business at American University. I also commend you for the high-caliber interns you have provided the Public Company Accounting Oversight Board.

David McGarry and Richard Reitman each worked with me and did an outstanding job, and I have received similar complimentary feedback with respect to Lee Shriki and Phil Black, who are interns in our Office of Research and Analysis. I have been asked to speak about the enactment of the Sarbanes-Oxley Act, provide an overview of the PCAOB, and share with you some of my priorities for the coming year.

Before I continue, our Board policy requires me to inform you that the views I express today are my own, and do not necessarily reflect the views of the other Board members or the staff of the Board. The Importance of Auditing to the Functioning of our Capital Markets At the outset I want to congratulate those of you who have chosen accounting and auditing as your field of study.

Accounting and auditing professionals serve an absolutely vital role in our capital markets. Transparent, informative Critically evaluate the importance of regulator accurate financial reporting are the lifeblood of the capital markets and are essential for investors to make informed decisions as to how to allocate their capital.

Without accurate and reliable corporate disclosures and financial statements — and competent auditors to audit them — our competitive free market system could not function properly.

American households invest their savings in the capital markets — either through mutual funds or by directly buying shares of public companies — to build wealth or fund important expenditures such as college education for their children, home purchases, and their retirement.

According to the most recent U.

The Importance of Auditing to the Functioning of our Capital Markets

Census Bureau survey, 42 percent of households have k or thrift savings plan accounts with money invested in the markets. Under our federal securities laws, auditors enjoy a unique franchise because every public company that raises money through our capital markets or has a security listed on an exchange must hire an independent public accountant to audit its financial statements.

The Supreme Court, in United States v. Arthur Young, described the audit as a "public watchdog" function that "demands that the accountant maintain total independence from the client at all times and requires complete fidelity to the public trust. Sarbanes during the consideration and passage of that legislation.

Congress acted in July in the aftermath of the accounting and auditing scandals at Enron and WorldCom. Accounting gimmickry at those companies included phony earnings, undisclosed related party transactions, and inflated revenues, followed by massive restatements.

Investors lost confidence in our markets following these failures. Between April and July the stock market dropped more than 22 percent — or some 2, points. At the very first hearing of the Senate Banking Committee, Chairman Sarbanes outlined the main issues he wished to focus on.

In my view, the most critical result of the Sarbanes-Oxley Act is that it ended the auditing profession's framework of self-regulation by creating the PCAOB to oversee the profession.

Critically evaluate the importance of regulator

Additionally, the Act focused on the need for heightened independence, objectivity and professional skepticism on the part of auditors, as well as on enhanced transparency and accountability on the part of auditors and corporate management.

Overview of the PCAOB The mission of the PCAOB as spelled out in Section of the Act is "to protect the interests of investors … in the preparation of informative, accurate and independent audit reports…" Basically, we work to ensure that audits are conducted properly by independent auditors.

The PCAOB also oversees the audits of broker-dealers, including compliance reports filed pursuant to the federal securities laws, to promote investor protection.

In addition to overseeing the audits of public companies and broker-dealers, the duties of the Board include: Registering public accounting firms that prepare audit reports for public companies and broker-dealers, including those that are listed on U.

The critical importance of being an effective regulator - Maddocks

Establishing standards that relate to the profession—including auditing, quality control, ethics, independence and other standards. To date, the Board has adopted 17 new auditing standards, as well as certain ethics and independence rules.

Conducting inspections of audits by registered firms. Inthe Board conducted more than inspections, including inspecting audits by firms in some 22 countries outside of the U.

Investigating, conducting disciplinary proceedings, and imposing sanctions on auditors and audit firms, as needed. Priorities Since coming to the Board, my primary focus has been on promoting investor protection through improving audit quality and ensuring that the investor is recognized as the primary client of the auditor.

The very first words of the Sarbanes-Oxley Act of are, "An Act to protect investors by improving the accuracy and reliability of corporate disclosures.1.

Critically evaluate the importance of regulator

Importance of a Draught Regulator. The purpose of a chimney (stack) is to generate a draught (draft) that will transport smoke and fumes away from the point of combustion. Achieving good regulatory outcomes is almost always a cooperative effort: by the regulator and other regulators, the regulated, and often the broader community.

The Sarbanes-Oxley Act

Governance arrangements for regulators can be important to foster such cooperative efforts and build the legitimacy of any necessary, strong enforcement action.

Critically Evaluate the Importance of Regulator in Financial Statement Users of accounting information, who do not have day to day access to the record of the business, rely on the integrity and judgment of management to provide suitable information of a high quality - Critically Evaluate the Importance of Regulator in Financial Statement introduction.

Two Important Dimensions of Regulation: Governance and Substance Conclusions and Implications for Regulatory Evaluation Appendix A Critical Standards for Effective Regulation of Infrastructure: A Detailed Exposition Handbook for Evaluating Infrastructure Regulatory Systems.

Discuss and critically evaluate this statement. As our world becomes increasingly globalized, a term used by marketing guru Theodore Levitt to depict extensive developments and advancements in communications and technology, resulting in an emerging worldwide cultural homogeneity (N.

Asgary and A. Walle, , The Cultural Impact of Globalization: Economic Activity and Social). Critically Evaluate the Importance of Regulator in Financial Statement Words | 6 Pages Key Concepts in Understanding Accounting and the Importance .

The critical importance of being an effective regulator - Lexology