Sarbanes-Oxley Act Sarbanes-Oxley The Integrity of Financial


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The Sarbanes-Oxley Act (SOX) signed into law in July 2002 was intended to improve the accuracy of the financial statements prepared by publicly held companies. Please read the attached summary of this Act in order to answer this question. A. Discuss how this law is likely to affect each of the following 6 issues: (Note: you should begin with a brief statement of the law as it pertains to each question and then explain the intended effect.) 1. Audit committees of public company boards of directors 2. The CEO’s and CFO’s of public companies 3. Outside independent audit firms 4. SOX section 404 on Internal Control 5. The accuracy of public company financial statements and the cost of capital for public companies 6. What changes should be made to SOX? . Sarbanes-Oxley Act PPT.ppt Sarbanes-Oxley Act Sarbanes-Oxley The Integrity of Financial Reporting The Integrity of Financial Reporting The The Gatekeepers (Guardians) are: The U.S. Securities & Exchange Commission (SEC) The Public Company Accounting Oversight Board (PCAOB) The Independent Audit Firm The Audit Committee of the Corporate Board of Directors The Internal Audit Function The Internal Control System Corporate Governance & Corporate Financial Reporting U.S. Securities & Exchange Commission (SEC) Public Company Accounting Oversight Board (PCAOB) Independent Audit Firm Corporate Board Of Directors CEO & CFO Audit Committee Internal Audit Function Internal Control System The U.S. Securities & Exchange Commission (SEC) (SEC) The mission of the SEC is to protect investors, maintain orderly and efficient financial markets, and facilitate capital formation. The laws and rules governing the securities industry derive from a straightforward concept: all investors, large or small, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it. Therefore the SEC requires public companies to disclose meaningful financial and other information to the public. This provides a common pool of knowledge for all investors to judge for themselves whether to buy, sell, or hold a particular security. For more visit: http://www.sec.gov/about/whatwedo.shtml Public Company Accounting Oversight Board (PCAOB) The PCAOB is a private, nonprofit corporation created by the Sarbanes­Oxley Act of 2002, under the oversight of the SEC, to supervise the auditors of public companies. The PCAOB was created to protect investors and the public interest. The PCAOB Board consists of five members, appointed by the SEC All accounting firms that perform public company audits must register with, and be regulated by, the PCAOB. The PCAOB performs regular inspections of the audit quality control systems of registered audit firms. The PCAOB sets auditing standards and related rules for public company audits, subject to SEC approval. The PCAOB has an enforcement division to discipline audit firms that do not adhere to its auditing standards and related rules. For more visit: http://www.pcaobus.org/index.aspx Independent Audit Firms Independent There are 1,867 audit firms registered with the PCAOB. But the vast majority of large public companies are audited by just one of the “Big Four” audit firms. Sarbanes­Oxley (SOX) main provisions for audit firms: – Section 204­ Auditors must report all critical accounting – policies and practices to the company’s audit committee. – Section 203­ The lead audit and reviewing partner must rotate off the audit every 5 years. – Section 201­ Prohibits any public accounting firm from performing non­audit services for public company audit clients. – Section 303: Improper Influence on Conduct of Audits. It is unlawful for any public company officer or director to fraudulently influence, coerce, manipulate, or mislead any auditor for the purpose of rendering the financial statements materially misleading. – Section 404: The auditor shall attest to, and report on, the assessment of internal c

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