In 2016, Yahoo disclosed that it was a victim a possibly state-sponsored cyber-attack in 2014. This breach compromised the real names, dates of birth, addresses and telephone numbers of an approximated 500 million users. This greatly affected the company’s performance and sale price in the market. According to SEC, companies are required to disclose the following information. The risk factors for potential cyberattacks, management’s discussion and analysis associated with security breaches, description of the business (how an attack would affect the company’s business aspects) and the conclusions on the effectiveness of disclosure controls and procedures.
In the contemporary business world, cyber-attacks have become the most common security issues that face publicly traded corporations. The effects of these breaches are usually severe and they may affect the daily operations and performance of a firm. Some of the effects include the exposure of crucial investment information from a company, which may adversely affect their stocks in the market. It is imperative to note that all the shareholders of the corporation may be affected by this leakage. Consequently, the firm may lose any chances of assurance coupled with a general decline in the prices of its stocks once the trade secrets are out. A corporation should therefore conduct a cybersecurity risk assessment before disclosing any information. Apart from network security, the company should insure themselves incase such an attack occurs.
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Cyberattacks directly affect the investors of a public company. In most cases, investors lose billions of shares to a company that is a victim of this security breach. In addition to this, these attacks have the potential of scaring off both existing and potential investors because they damage their stock values and expose them to the burden of incurring potential legal liabilities. As a countermeasure, it is imperative for such a firm to update its malware security program because most information in the modern world is computerized.
The independent auditor is tasked with the responsibility of protecting potential investors and shareholders from any unrepresentative or fraudulent financial claims that are made by public corporations. The relevance of the independent auditor’s role in a firm came after the dotcom bubble and the enactment of the SOX Act in 2002. Consequently, strict reforms pertaining to the employment of independent auditors were instituted for the purpose of monitoring all auditing and accounting procedures within an organization. The Board of directors on the other hand did not have the opportunity to handle and control the internal practices of financial reporting. Consequently, this means that both parties did not exercise their responsibilities in a transparent manner as a result of a relaxed business environment where the above procedures were not adhered to.
There is need for Koss Corporation to maintain a controlled environment for both the auditors and board of directors. This means that internal control measures must be adopted and utilized by these two parties at all times whenever they carry out their duties. Risky activities related to communication and information as well as fraud would have a less likelihood of occurring if there was no inconspicuousness. This is a very important measure because it prevents the chances of fraudulent activities from occurring. The use of these internal elements of control would have definitely eliminated any chances of embezzlement from occurring at the company.
