The, Oxley Act ( Sox )

To consider this we need net credit sales and average receivable balance. This ratio indicates average collection period should be consistent with corporate credit policy. An increase suggests a decline in financial health of customers.

In order to confirm the accounts receivable balances, I decided to use positive confirmations since this was my first time auditing the company and the collateral for the loan would be the receivables. The confirmations helped to verify the accuracy and existence of the accounts. I also calculated the Receivables Turnover Ratio in order to better evaluate the overall success of collection on accounts. The sample size that I chose was determined by the factors of tolerable misstatement, inherent risk, control risk, achieved detection risk

The Sarbanes-Oxley is a U.S. federal law that has generated much controversy, and involved the response to the financial scandals of some large corporations such as Enron, Tyco International, WorldCom and Peregrine Systems. These scandals brought down the public confidence in auditing and accounting firms. The law is named after Senator Paul Sarbanes Democratic Party and GOP Congressman Michael G. Oxley. It was passed by large majorities in both Congress and the Senate and covers and sets new performance standards for boards of directors and managers of companies and accounting mechanisms of all publicly traded companies in America. It also introduces criminal liability for the board of directors and a requirement by

In percentage of receivables is based on an aging schedule. The aging schedule compares customer balance with how long they have been unpaid. The aging report is managed daily and the company manages the accounts by age and develops an expected loss. The percentages of loss can change during each period based on the length of time an account is outstanding, so there are adjusting entries that will have to be made to accurately record the losses.

The Sarbanes-Oxley Act (SOX) of 2002 was implemented to deter fraudulent activities amongst companies by monitoring and auditing financial activities as well as set up internal controls to aid in the safeguard of company funds and investor’s interest. SOX also regulates the non-audit tax services (NATS) that can be performed by an auditing firm. SOX was passed by Congress in 2002 in an attempt to address the unethical behaviors of corporate firms such as Enron, WorldCom, Sunbeam, and others (Raabe, Whittenburg, Sanders, & Sawyers, 2015). Raabe et al. (2015) continues explaining that SOX was created in response to the inadequacies

Objective: Prepare journal entries to account for transactions related to accounts receivable and bad debt using both percentage of sales and the percentage of receivables methods.

The Sarbanes-Oxley (SOX) Act was passed by Congress in 2002 to address issues in auditing, corporate governance and capital markets that Congress believed existed. These deficiencies let to several cases of accounting irregularities and securities fraud. According to the Student Guide to the Sarbanes-Oxley Act many changes were made to securities law. A new federal agency was created, the entire accounting industry was restructured, Wall Street practices were reformed, corporate governance procedures were changed and stiffer penalties were given for insider trading and obstruction of justice (Prentice & Bredeson, 2010). Tenet Healthcare Corporation, one of the largest publicly traded healthcare companies in the US at the time, was accused

In the early 2000’s there were a series of financial scandals that took place by large companies such as Enron, Tyco, and WorldCom. The impact of these scandals was significant. Investors lost large amounts of money. Employees of the scandalous companies not only lost their jobs but lost their life savings. The financial scandals that had taken place were so severe that an Act was created in response to them in hopes to prevent these scandals from happening. The Sarbanes-Oxley Act, also referred to as SOX or Sarbanes-Oxley, was created by Senator Paul Sarbanes and Representative Michael Oxley and was signed into law by President George W. Bush on July 30, 2002. The creation and passing of the act was so tremendous that “in the opinion of most observers of securities legislation” Sarbanes-Oxley was “viewed as the most important new law enacted since the passage of the Securities and Exchange Act of 1934” (Ink.com 2008).

Prior to the advent of the Sarbanes-Oxley Act of 2002, referred to herein as “SOX,” the board of directors’ pivotal role was to advise senior leaders on the organization’s strategy, business model, and succession planning (Larcker, 2011, p. 3). Additionally, the board had the responsibility for risk management identification and risk mitigation oversight, determining executive benefits, and approval of significant acquisitions (Larcker, 2011, p. 3). Furthermore, for many public organizations, audit committees existed before SOX and provided oversight of internal processes and controls. Melissa Maleske (2012) advised that the roles and responsibilities of the board were viewed “…from a perspective that the board serves management” (p. 2). In contrast, Maleske (2012) noted that SOX regulations altered the landscape “…to a perspective that management is working for the board” (p. 2). SOX expanded not only the duties of the board and the audit committee, but also the authority of these bodies (Maleske, 2012, p. 2).

Based on the video "Bigger Than Enron," discuss at least five features of the Sarbanes-Oxley Act (SOX) that are the result of events related to corporate fraud.

Tighten up collection of receivables so that receivables account for less than 19% of Sales (1985). Pursue more aggressive strategy of collections;

11. Accounts receivable turnover and days sales in accounts receivable for the last three years:

Over the last two decades the consulting practices within the Big Four accounting firms saw a variety of changes take place. This began when the accounting world was faced with multiple scandals around the turn of the century, which prompted the Sarbanes-Oxley Act (SOX). SOX mandated that public accounting firms could no longer provide both audit and consulting services to the same client. This forced the firms to brainstorm new ways to comply with the laws and standards, and overtime they created innovative ways to adhere to regulations. We examine the issues leading up to the new regulations, the Big Four firms’ reactions to the new regulations, and how consulting rebounded after SOX. We also analyzed what the consulting line of service at the Big Four will look like in the future and discuss why the Big Four firms want to preserve a presence in the consulting business. Overall, our research suggests that the consulting sector is lucrative, and the firms need revenues from non-audit clients in order to continue to grow their business.

Accounts receivable turnover is the second method by which a company’s trade receivables’ liquidity can be evaluated (Gibson, 2011). Žager et al. (2012) noted turnover ratios should be as high as possible as this indicates a firm’s ability to convert its assets more often. 3M’s accounts receivable turnover for years 2007 and 2008 is shown in Exhibit 2. In 2007, 3M turned its accounts receivable over 7.12 times and 7.70 times in 2008. This calculates into a turnover of its accounts receivable every 51.28 days in 2007 and 47.38 days in 2008. The increase in accounts receivable turnover times per year (decrease in number of days to turnover accounts receivables) from 2007 to 2008 is a positive trend for 3M. It suggests, along with the prior calculation, the management of receivables is likely to be improving in efficiency.

Garners’ accounts receivable management ratios appear to be lower than its industry average which is an indication of good management since it desires to receive payment sooner than the industry average (Cornett, Adair, Nofsinger, 2015). The company could have too much control on its crediting terms, and might look into decreasing its crediting procedure slightly; however, for the most part, the company is doing well in collecting payments.