Acct 652 WK 1: Ethics Discussion Response

Posted: August 26th, 2021

Acct 652 WK 1: Ethics Discussion Response

Name

Institutional Affiliation

Acct 652 WK 1: Ethics Discussion Response

Natalie Response

How Do SOX Requirements Apply to Not-For-Profit (NFP) Entities? What Improvements Do You Recommend to the Application Of SOX to NFP Entities?

Sarbanes-Oxley mostly applies to public organizations; however, two criminal provisions do apply to nonprofit organizations. These provisions are regardingrecord-keeping and whistleblowers. The SOX Act dictates that if an organization were to knowingly alter, falsify, cover-up, or destroy documents that would be utilized in an investigation, the consequence would be up to 20 years in prison and/or a fine (ABA, n.d.). The other criminal provision prevents any retaliation from whistleblowers. The crime is punishable by fine and 10 years in prison (ABA, n.d.). Some improvements that could be made to SOX in regards to nonprofits could be in regards to the responsibilities of the board. Having a definite requirement for the conduct and integrity of the board of the nonprofit would be beneficial in providing security to donors and recipients of the organization’s processes. Many issues that brought on the need for Sarbanes-Oxley were about the actions of either a company’s executives or board of directors. Having similar consequences for misconduct in a nonprofit included in the law would be a useful improvement. 

Reply

Agree. Sarbanes-Oxley providescritical guidelines to NFP about ensuring proper safeguarding of records and protection of whistleblowers. By following the guidelines in the Act, especially in the current era which is characterized by stringent scrutiny measures, the NFP can establish an excellent draft that could build the company’s good reputation (Jackson & Fogarty, 2006). As a result, the donors and stakeholders would be willing to support such organizations because of trust.

Primarily, SOX addresses two key issues that directly affect NFP, as filed in the response. These are document retention and guidelines for destructions as well as the protection of whistleblowers (Jackson & Fogarty, 2006). Whereas most of the provisions in the SOX Act apply to the US corporations reporting under the Securities and Exchange (SEC) Act of 1934, the section on document retention and guidelines for destructions is universal and in particular, addresses how NFP should retain or destroy documents crucial on their financial records (Jackson & Fogarty, 2006).  Similarly, the guidelines for protecting whistleblowers are equally applied to SEC corporations and NFPs. However, the consequences applied to SEC corporations as penalties for failure to adhere to SOX Act guidelines are limited when it comes to NFP (Jackson & Fogarty, 2006). As such, there is a need to embrace the same guidelines on the consequences of NFP to ensure financial accountability and proper management of information. 

Sue Response

What is Yellow Book Training?

Generally Accepted Government Auditing Standards (GAGAS), also referred to as the Yellow Book, was created for auditors of government entities as a set of guidelines in the service of performing high-quality audits. Auditors use the Yellow Book standards because it contains all the requirements and guidelines for creating reports and performing audits.

Auditors that work with government entities are required to comply with GAGAS and must have 24 hours of CPE training every two years to maintain their credentials.

Reply

Agree. As filed in the response, Yellow Book training is an established curriculum for training auditors of the government entities, audit organizations that receive Yellow Book audits about the requirements for audit reporting (Harrell & Barbacci, 2017). Auditors of state, local, and federal governments perform audits and produce reports according to standards stipulated by the Yellow Book (Harrell & Barbacci, 2017). Hence, through training, prospective auditors get to understand the required principles of financial auditing and statements as well as attestation engagement according to government-established standards.

References

Harrell, A. & Barbacci, J. (2017). Yellow Book: Government Auditing Standards. Durham, NC: Association of International Certified Professional Accountants, Inc.

Jackson, P. & Fogarty, T. (2006). Sarbanes-Oxley and nonprofit management: skills, techniques, methods. Hoboken, N.J. Chichester: Wiley John Wiley distributor.