Session 6 - Regulation of Auditing and the SOX Act

Session 6 - Regulation of Auditing and the SOX Act -...

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Class 6: Regulation of Auditing and  the SOX Act Hye Sun Chang ACCY 303  
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Wrap-up Wrap-up • Session 2 (Regulation)   Free Market  by Adam  Smith Economic motives for government intervention 1.To enforce property rights 2.To address market failures  (externalities, public goods, monopolies, and information asymmetry) Government intervention Pros: reduced transaction costs etc.   Cons: taxes, deadweight losses, and litigation costs  
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Wrap-up Wrap-up • Session 3 (Regulation of capital market)   To reduce information asymmetry in the capital market,  -Enforce full disclosure -Increase the credibility of the disclosure  Information asymmetry is serious in the capital market.  -Selective disclosure -False disclosure
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Wrap-up Wrap-up • Session 4 (Regulation of accounting standards)                   Exposure draft (e.g. Exposure draft for SFAS 123R)                                     Requests for possible projects     Reconsideration of existing standards  (e.g. APB No. 25 & SFAS 123)           Statement of Financial Accounting Standards (e.g. SFAS 123R)
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Wrap-up Wrap-up Session 5 (Regulation of accounting standards) - Land Securities   - Three approaches have been take to achieve convergence goal:   1.    Short-term projects to narrow differences in current standards         e.g. SFAS 123R 2.      Joint long-term projects to improve current standards          e.g. accounting for asset impairments  3.     Coordination of standard setting agendas to develop common standards         e.g. preliminary views on financial statement presentation   
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Outline Outline • Reason for auditing. • SOX, its benefits and costs.
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The Role of Audit in the Capital  The Role of Audit in the Capital  market market Welfare maximization Welfare maximization Optimal allocation of resources Optimal allocation of resources Market allocates resources Market allocates resources Resources are scarce Resources are scarce Comparable Information requires Accounting Standards Comparable Information requires Accounting Standards Information supplied Information supplied Credible Information  needs Auditing
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Relationship between auditor and  Relationship between auditor and  others.
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This note was uploaded on 11/08/2011 for the course ACCY 303 taught by Professor Staff during the Spring '08 term at University of Illinois, Urbana Champaign.

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Session 6 - Regulation of Auditing and the SOX Act -...

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