Question

How did the Sarbanes Oxley Act affect the FASB and the AICPA?

Answer 1

Sarbanes Oxley Act (SOX) significantly affected FASB (Financial Accounting Standards Board). Post the implementation of SOX there was a huge increase in the total workload of FASB and this was accompanied by a decline in the speed of standard setting by FASB. There was also increase in the cost associated with running the FASB. SOX initiated changes in accounting regulatory process and this was particularly for FASB which was the standards setting body. While the operational pressure and cost pressure increased on FASB it also led to operational modifications that eventually improved FASB’s efficiency as well as its timeliness of standard setting.

SOX also significantly affected AICPA (American Institute of Certified Public Accountants). AICPA requires ethics and independence as key characteristics of public accountants and SOX strengthened these underlying values of public accountants through robust and strict regulation. Better standards were developed and put in place for audit and profession’s technical and ethical standards were given a strong boost.