ACCT207 Chapter Notes - Chapter 5: Public Company Accounting Oversight Board, Chief Executive Officer, Chief Financial Officer
28 Mar 2016
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Corporate governance: procedures designed to ensure that the company is managed in the interests of the shareholders: system is aimed at ensuring integrity in the financial reporting process. Good corporate governance eases the company"s access to capital, lowering both the costs of borrowing (interest rates) and the perceived riskiness of stock. On average, disclosure of an accounting fraud causes a 20% drop in the price of a company"s stock. Sarbanes-oxley act (public accounting reform and investor. Protection act): law which strengthens us financial reporting and corporate governance regulations for public companies. Three conditions are necessary for financial statement fraud to occur: (1) an incentive to commit fraud, (2) the opportunity to commit fraud, (3) the ability to rationalize the misdeed, known as the fraud triangle (cid:1) (cid:1) Exhibit 5. 1 summarized the major actors involved in ensuring the integrity of the financial reporting process.
