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Sarbanes-Oxley Act
Included in this three-page white paper are some HIGHLIGHTS OF THE SARBANES-OXLEY ACT OF 2002 which your company may want to take a look at. In response to the burgeoning corporate accounting problems involving listed companies, the United States Congress in late July overwhelmingly approved and President George Bush signed into law, the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act is most notable for imposing increased reporting obligations on issuers and for its substantial federalization of public company accounting practice and standards. The Act also creates or substantially increases criminal penalties for white collar crimes, enhances corporate governance, and imposes federal ethical responsibilities on securities lawyers. Selected provisions of the Act are outlined below. Certain provisions of the Act apply to foreign issuers listed in the United States, irrespective of their jurisdiction of formation – a concept that has caused the European Union to protest the US action. Public Company Accounting Oversight Board The Act creates a five-member Public Company Accounting Oversight Board to oversee audits of public companies. The Board is to have five members, of whom exactly two are to be certified public accountants. The Securities and Exchange Commission, after consultation with the Chairman of the Federal Reserve Board and the Secretary of the Treasury, will appoint its members. Public accounting firms must register with the Board, and the Board will establish and enforce auditing, quality control, and independence standards. The Board itself will be subject to SEC oversight. The Board will be funded by fees on public companies based on their equity market capitalizations, and the Board will also use these fees to fund the Financial Accounting Standards Board, which will continue to establish generally accepted accounting principles. The SEC is to determine, within 270 days after the Act's enactment, that the Board has the capacity to carry out the Act's requirements, and public accounting firms must register with the Board within 180 days after that determination. Auditor Independence A public company may not obtain any non-audit services from its auditor, except with the pre-approval of the audit committee and disclosure in its SEC reports. This requirement will take effect 180 days after the date of commencement of the operations of the Public Company Accounting Oversight Board. In addition, a public accounting firm must rotate the lead audit partner and the audit partner responsible for reviewing the audit of a public company every five years. Additionally, a public accounting firm may not audit an issuer if the issuer's chief executive officer, controller, chief financial officer, chief accounting officer, or equivalent person was employed by the public accounting firm and participated in the audit of the issuer in the past year. [continued...] Want to know more? Download the White Paper "Sarbanes-Oxley Act" for just $9.95. |
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