Auditing: Events that led to the Sarbanes Oxley Act

  • AICPA Develops COde of Professional Conduct

    AICPA Code of Professional Conduct is made to define what an independent auditor is and the professional conduct in an audit. For example, an audit firm cannot say "World's Best Auditors" as an advertising slogan because that is deemed unprofessional conduct.
  • GAAP is Defined

    GAAP, or Generally Accepted Accounting Principles, defines ten open rules for audit and reporting standards. GAAP is still used today.
  • COSO is Adopted

    COSO, or the Committee of Sponsoring Organizations, is also added to GAAP requirements as a qualitative analysis of a company's controls. Required for publicly traded companies, COSO is still a necessary part of the audit engagement.
  • Enron and Arthur Anderson

    Enron, an energy and securities trading company, files for Chapter 7 Bankruptcy after admitting accounting records were falsified and approved by the accounting firm Arthur Anderson. Billions were lost, Arthur Anderson went bankrupt due to court settlements, and the "Big 5" turned to the "Big 4."
  • Sarbanes-Oxley Act is Signed to Law

    SOX, or the Sarbanes-Oxley Act, is created in response to the Enron collapse. Stricter security regulations are adopted and COSO is further expanded.