Sarbanes-Oxley Act and Amazon

Sarbanes-Oxley Act and Amazon

Nichole Caruthers

340

June 8, 2015

Michael Raponi

Sarbanes-Oxley Act and Amazon

The Sarbanes-Oley Act of 2002 was established to protect external users from fraud, misrepresentation, and the rights of workers and investors. The act completely changed the internal workings of Amazon as it effects all parts of accounting information systems. There are different ways of auditing information systems though one has advantages over the other. When proper controls are in place systems can be highly effective and imperative.

The Sarbanes-Oxley Act of 2002 (SOX) was signed by President Busch on July 30, 2002. It was a tough new law that was enacted against those who might shake the confidence of the markets and used to expose corruption, punish wrongdoers, and defend the rights of workers and investors (Holt, 2007). The SOX had a significant impact on Amazon as the now successful E-giant was established in 1194 and did not become public until 1997. During the small amount of time that Amazon was not a public company, SOX did not apply to internal controls of the accounting information system. Once Amazon became public on May 15, 1997 with a stock price of $18.00 the company was liable to abide by the rules and regulations that SOX requires (Amazon, n.d.).

The Sarbanes-Oxley Act of 2002 required many changes for Amazon to meet all of the requirements. Section 108 of SOX defines what principles and practices that Amazon is obligated to use the accounting systems while section 201 and 202 define external auditor services. Both sections are important not only the design of the Accounting Information System that Amazon was required to design but also because it requires the external auditing services that Amazon must allow access to the Accounting Information System. Closely related is section 204, 205, and 301. These sections are the ones that require Amazon establish an Auditing Committee. Amazons Audit committee was selected from the board of directors who handles helping auditors remain independent of Amazon's management (Holt, 2007).

Other sections of the SOX effect Amazon by protecting the investors and stockholders. One of these such sections is section 302. Section 302 states that the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) must certify the internal controls and that all the financial reports are correct to the best of their knowledge. Another section that applies to executives is section 403 which states that no executives may take loans from the company. When Amazon went from a small startup e-business company the changes greatly impacted the way the company was run and the way that Accounting information system records were kept (Holt, 2007).