Business regulatory environment has been highly enhanced in the 21st century. The US congress employed a number of measures, including the passing of the 2002 Sarbanes-Oxley Act (SOX) in 2002 to safeguard investors from the probable corporate fraudulent accounting practices. The SOX instructed strict restructuring to enhance corporations’ financial disclosures and to eliminate accounting fraud. The strict restructuring was enforced following early 2000s accounting scandals that include WorldCom, Tyco, and Enron that shook confidence of investor in financial statements and needed regulatory standards overhaul. This paper focuses on evaluating the accounting regulatory environment in in Apple Inc. based on the Public Company Accounting Oversight Board (PCAOB).
Regulatory that Would Apply in Apple Inc.
Apple Inc. is a publically traded corporation in America and thus it is entitle to follow a number of accounting regulation to attain the required standards for the corporations of its level in the country. The company will be required to conform to the financial reporting regulations as required by section 13(a) and 15(d) of the 1934 Security Exchange Act (Sec.gov, 2002). Based on the 1933 Security Act, the company is required to offer financial and other important information regarding securities being sold publically by security registration. This information will guide investors in making informed decision regarding whether to but securities of the company or not (Sec.gov, 2016). Apple Inc. has total assets that are valued at 89.38 billion dollars and thus, based on the corporate reporting rule, a company with over 10 million dollar of assets and that is owned by more than 500 individuals is required to file annual reports and other periodic reports. Apple satisfies the two requirements and thus it is also required to adhere to this law (Investor.Apple.com, 2016).
Benefits of Complying with Regulations
The accounting regulations were basically developed to protect investors from any form of exploitation and fraud from corporations. Every company wishing to trade in security exchange market must comply with those rules, failure to which the companies are fined hefty and their reputation is tarnished. Thus, the main benefit of complying to the regulations is that it safes the companies’ reputation, prevent loss of time and resources in lengthy legal processes, and increase the investors trusts, giving the company’s stock more value and preference in the market. It also ensures that the company works smoothly without risking loss of its license or operational rights due to its inability adhere to the government requirements.
Government regulations have also been highly associated with high level of innovation in various industries. Government regulations that include environment regulations have highly enhanced the development of more economic friendly production techniques, which have been of great importance to many industries in terms of efficiency and operation cost reduction. Compliancy also brings competition balance in the industry. Malicious accounting practices that happened in the past lifted the involved companies higher in the market, creating unhealthy and unjustified competition in the market, where genuine and performing companies were denied high recognition by investors as it was supposed to be. Complying assists the industry in maintaining healthy market competition and thus, increasing the companies urge to be more innovative and creative in their production and operation. It also increases the level of operation conducts and ethics in the industry, eliminating various scandals that would make the industry products or operations questionable. It increases the level of ethics in the workers operations, preventing them from being involved in illegal operations that can jeopardize the corporation success.
Most government regulations have highly focused on protecting consumers’ health and safety in ensuring only standard products are brought to the market. The government has imposed laws to regulate on the production processes, labeling and marketing, pricing, and environmental regulation among others. These laws focus on ensuring that the consumer is highly protected from unhealthy product that would compromise on their safety and health, in ensuring a clean and healthy environment to reduce illnesses, to ensure fair pricing of products, as well as enhancing the shopping efficiency among others.
How the PCAOB Agency and Apple Works Together
The PCAOB is a congress established nonprofit corporation which was formed to supervise the public companies audits so as to safeguard public interest and investors by promoting independent, accurate and informative audit reports. The board also supervises the dealers and brokers’ audits that include amenability reports filed pursuant to federal laws of securities, to enhance investor protection. The board main relation with the company is that it ensures audit compliance by evaluating auditors, based on their work and making comprehensive report regarding their proficiency and efficiency. This guides the company in the selection of the best auditing firm, which is certified, and thus, eliminating chances of having unstandardized reports that would affect its compliance to the set rules.
Read also Regulatory and Compliance Issues – PCAOB
The PCAOB ensures compliance in all auditing agencies and bodies in the country, protecting corporations from being deceived by them. They also review all the corporates financial auditing report and give their views on the compliancy level of the involved auditing company. It therefore guide the company in selecting the best auditing company which will satisfy its auditing needs as per the law and guide the company while change of the auditing company is needed. The board regulates auditors’ behaviors, protecting the corporation from any fraud related activities from them with collaboration of other corporate stakeholders (Pcaobus.org, 2016).
The Role of Ethics in the Regulatory Environment
Ethics in a regulatory environments dictates on how the involved parties should be have while conducting their daily business. Ethics ensure that the involved parties behave with the highest level of integrity, honesty, professionalism, and accuracy while making their financial reports and assessment to ensure that all necessary reports reflects the actual situation in the company. This increases the level of dependability of the corporate financial statements to investors and the general public. Ethics employment ensures that the involved parties; auditors and accountants are highly supervised by the relevant body to maintain their behavior within the required standards and thus protecting the corporate from any malicious accounting operations for individuals’ benefits (Senaratne, 2011).
How Regulatory Environment Would Impact My Role in the Company
The regulatory environment will affect my future role as an auditor in the company. The environment dictates on how auditors should conduct their business, and the PCAOB is mandated to review the auditors’ report to evaluate its compliance to the set standards. The board also reviews auditors’ behaviors regularly to ensure that they are not involved in any malicious activities. In this regard, I will be forced to learn more about those regulations, particularly those that dictates on the auditors’ behaviors.
I will be required to be careful while giving my analysis and opinion regarding the company’s financial reports filed by the company accountants. I must ensure that the accountants have demonstrated their ability and professionalism in the reports preparation, and honestly point out any error or non-compliance practice conducted by the company’s financial department without fail. This will intensify my work, and make me more comprehensive in the analysis. I will be forced to comply with the set code of conduct and to allow for investigation in case of any doubts on my conducts.
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