AUD 2 - Professional Responsibilities & Ethics Flashcards
1
Q
What is the 3-step process of the Conceptual Framework Approach regarding to Independence?
A
- Identify the threats
- Evaluate the significance of identified threats
- Identify & apply safeguards
2
Q
What are the 7 threats to Idependence?
MUFASSA
A
- Self-Review - Auditing own work
- Self-Interest - acct has financial interest in client (stocks)
- Adverse Interest - Filing a lawsuit against the client
- Advocacy - Accountant promoting client’s interest/position
- Familiarity - impair appearance to the public
- Undue Influence - attempts by mgmt/others to excercise an excessive amount of influence over the accountant
- Management Participation - acct takes mgmt role
3
Q
Safeguards
(to Independence)
What are the 3 different kinds?
A
Safeguards are controls that eliminate or reduce threats. Safeguards are considered effective if they eliminate a threat or reduce it to an acceptable level.
There are three different kinds of safeguards:
- Safeguards imposed by requirements of the profession OR legislation/regulation
- Such as SOX
- Safeguards result from client’s characteristic or policies
- Corporate governance
- Safeguards implemented by the CPA firm
- Policies (Quality Ctrl)
4
Q
Whom is a Covered Member?
A
Covered members are persons in a position with the potential to influence audit decisions, including:
- Individuals on engagement team.
- Individuals who supervise or evaluate the engagement partner.
- Partners who provide non-attest services to the client.
A covered member would be any of the following (must be independent of the audit client):
- A member of an attest engagement team.
- A partner or manager providing more than 10 hours of nonattest services to the attest client within a fiscal year.
- The audit firm & its employee benefit plan.
- A partner in the same office in which the lead engagement partner for the attest engagement practices.
5
Q
What types of engagements may a Covered Member perform?
A
A Covered Memeber:
- Must maintain Independence for Attestation Engagements (ERAS)
- Examinations - Audits
- Reviews
- Agreed-upon procedures
- Special Reports
- Need not be independent for:
- Taxes
- Consultations
- Preparations engagements
- Compilations (when lack of indpendence is indicated)
6
Q
Direct Financial Interest
vs.
Material Indirect Financial Interest
A
NOTE: If both are owned by the Auditor, he/she is NOT considered independent.
Direct Financial Interest - Ownership of any equity interest, being a debtor to, or a creditor of a client.
- Materiality is not applicable. Example: Even if an auditor has only 1 stock in the audit client, the auditor is not independent since he/she has a direct/control over that financial interest.
Material Indirect Financial Interest - Holding an equity interest, being a debtor to, or a creditor of a client through some means other than direct ownership, such as owning a material interest in an investment fund that holds a material equity interest in the client.
7
Q
Consulting Services
Consists of what 3 services? (PIA)
A
Consulting services consists of:
- Product or Technical assistance services
- Implementation services,
- Advisory services
NOTES:
- Independence NOT needed.
- A written or oral understanding w/ the client should be established.
8
Q
Valuation Services
A
Valuation Servrices - Involves in the valuation of business, ownership interest, securities, or intangible assets. Examples:
- Purchase price allocations
- Goodwill Impairment
9
Q
Personal Financial Planning Services
A
Personal Financial Planning Services - Assisting clients in identiying & establishing personal financial goals & resources. Services may include cash flow, risk & mgmt, investment planning, tax planning.
10
Q
Tax Services
What are the 4 Reporting & Disclosure requirements?
A
The practitioner should not recommend a position or prepare or sign a tax return taking a position that the practitioner does not have a good faith belief that has substantial authority in favor of being sustatined on the basis of the merits of the position.
- More Likely Than Not - Greater than 50%
- Substantial Authority - Approximately 40%
- Realistic Possibility - Approximately 33%
- Reasonable Basis - Approx 20% probability of success
11
Q
Employment with Audit Client
(Procedures)
Prior to leaving & After employed?
A
Prior to leaving:
- Must inform audit firm of conversations w/ client about possible employment
- Immediately be removed from the audit
- Once removed, the audit firm must review the work performed by the auditor planning on leaving
After Employed by the Audit Client:
- Audit firm must consider modifying the audit plan
- Assure remaining audit team is objective
- The next annual audit must be separately reviewed by an audit frim professional uninvolved in the previous audit.
12
Q
Contingent Fees
&
Commissions/Referral
A
CPA may not accept a contingent fee for:
- Audit or Review
- Compilation of FS
- Examinations
CPA may accept a contingent fee for:
- Representing a client in an examination of an income tax refund
- Filing an amended income tax refund claiming a refund
A CPA may accept commission/referrals for:
- from Non-Attest engagement client
- Payment fully disclosed to client
- No commission if required to be independent
13
Q
When may an auditor/member accept commission & referral fees? (2)
A
- Non-attest engagement client
- Payment fully disclosed to client
- No commission if req’d to be independent for the service provided.
14
Q
Working Papers
What are the 4 exceptions to Confidentiality?
A
Information is considered confidential, NOT priviliaged. Must not reveal information without client permission with certain exceptions:
- Valid subpoena or summons
- IRS Administrative subpoena
- Court order
- Quality control peer review program
- Cannot give infor to another CPA, no professional courtesy
- May NOT take copes of client’s files when leavng the firm.
15
Q
Sarbanes-Oxley Act of 2002
(SOX)
What are the first 4 Titles?
A
An act created in an effort to restore investor confidence by requiring mgmt of public companies to be responsible for the accuracy of the entity’s financial statements & increasing penalties for fraudulent activity.
First 4 Titles are:
- Title 1 - Public Accounting Oversight Board (sections)
- Title 2 - Auditor Independence
- Title 3 - Corporate Responsibility
- Title 4 - Enhanced Financial Disclosures
16
Q
Private Securities Litigation Reform Act of 1995
(RIG)
A
Designed to limit frivolous lawsuits, it imposes requirements to include audit tests to detect matters such as:
- Related-party transactions
- Illegal acts
- Going concern doubts
17
Q
Privacy Acts
Federal Privacy Disclosure Rules - Gramm Leach-Bliley Act
vs.
The Financial Services Modernization Act of 1999
A
Gramm Leach - When performing tax/financial planning, the FTC requires certain disclosures be made in writing or electronically to all clients
- The categories of personal info to be collected, disclosed, and to which third parties this info may be disclosed
- The CPA’s policy on sharing info of past clients & the policy regarding protecting the confidentiality, security & integrity of the info.
Financial Services Modernization Act of 1999 - Prohibits financial institutions from sharing private personal info to nonaffiliated third parties w/o prior notice to the client.
18
Q
How long must Work Papers be kept?
A
Auditor’s documentations kept for atleast 7 years under PCAOB & 5 years under GAAS that describes the work performed, evidence obtained, & the conclusions drawn to support the auditor’s report. Workpapers are considered confidential information.
19
Q
PCAOB Standards (AS)
Responsible for standards related to? (4)
A
The PCAOB is responsible for standards related to:
- Auditing
- Attestation
- Quality Control
- Ethics Standards
- Independence
- Integrity & Objectivity
20
Q
International Ethics Standards Board for Accountants
(IESBA)
Contains what 3 parts?
A
Establishes ethic standards for accountants internationally, including requirements for auditor independence.
The IESBA contains 3 parts:
- General Application
- Professional Accountants in Public Practice
- Professional Accountants in Business
21
Q
International Auditing & Assurance Standards Board
(IAASB)
A
Responsible for developing international auditing standards (ISA), international standards on assurance engagements (ISAE), international standards on quality control (ISQC), & practice statements.
22
Q
Securities & Exchange Commission
(SEC)
A
Government agency responsible for enforcing federal securities laws, established to protect investors.
23
Q
Government Accountability Office
(GAO)
A
Government agency responsible for investigating how the federal government spends taxpayer money & to ensure the accountability of the federal governmnet.
24
Q
Generally Accepted Goverment Accounting Standards
(GAGAS)
A
Standards established by GAO, also called “the Yellow Book”, for auditors of government entities.
25
SOX - Title 1
101
**SOX Title 1 - Public Accounting Oversight Board (sections)**
* **101** - Establishes the board, consists of 5 full time members, exactly 2 are CPAs, all appointed by the SEC
* **102** - Requires public acctg firms to register with the PCAOB
* **103** - Authorizes the board to establish standards, quality control standards, & ethics standards to be used by registered acctg firms in the preparation & issuance of audit reports.
* Standards either by the AICPA or the PCAOB or a combination of the two
* Must keep workpapers for 7 years from report release date
* A second partner is required to review all audit reports
* Audit reports must describe the scope of testing for I/C
* **104** - Provides for Quality Control *Peer Review **Inspections*** to be conducted by the board
* Must be performed **every year** for firms that provide **more than 100 audit reports** annualy
* Atleast **every 3 years if less than 100** annualy
* **105** - Gives Board authority to conduct investigations & obtain all relevant info
* Power to suspend auditors
* Revoke registration of acctg firms
* Impose penalties
* **106** - Regulates foreign public acctg firms furnishing an audit report to an issuer & requires them to comply with the board requests
* **107** - Gives SEC oversight & enforcement authority over the Board & its decisions
* **108** - Amends the Securities Act of 1933 to allow the SEC to adopt the accounting standards established by a standard setting body such as FASB.
* **109** - Calls for funding of the Board & the designated accounting standard-setting body (FASB) to be funded from fees imposed upon public companies
26
SOX - Title 1
102
**SOX Title 1 - Public Accounting Oversight Board (sections)**
* **101** - Establishes the board, consists of 5 full time members, exactly 2 are CPAs, all appointed by the SEC
* **102** - Requires public acctg firms to register with the PCAOB
* **103** - Authorizes the board to establish standards, quality control standards, & ethics standards to be used by registered acctg firms in the preparation & issuance of audit reports.
* Standards either by the AICPA or the PCAOB or a combination of the two
* Must keep workpapers for 7 years from report release date
* A second partner is required to review all audit reports
* Audit reports must describe the scope of testing for I/C
* **104** - Provides for Quality Control *Peer Review **Inspections*** to be conducted by the board
* Must be performed **every year** for firms that provide **more than 100 audit reports** annualy
* Atleast **every 3 years if less than 100** annualy
* **105** - Gives Board authority to conduct investigations & obtain all relevant info
* Power to suspend auditors
* Revoke registration of acctg firms
* Impose penalties
* **106** - Regulates foreign public acctg firms furnishing an audit report to an issuer & requires them to comply with the board requests
* **107** - Gives SEC oversight & enforcement authority over the Board & its decisions
* **108** - Amends the Securities Act of 1933 to allow the SEC to adopt the accounting standards established by a standard setting body such as FASB.
* **109** - Calls for funding of the Board & the designated accounting standard-setting body (FASB) to be funded from fees imposed upon public companies
27
SOX - Title 1
103
**SOX Title 1 - Public Accounting Oversight Board (sections)**
* **101** - Establishes the board, consists of 5 full time members, exactly 2 are CPAs, all appointed by the SEC
* **102** - Requires public acctg firms to register with the PCAOB
* **103** - Authorizes the PCAOB to establish standards, quality control standards, & ethics standards to be used by registered acctg firms in the preparation & issuance of audit reports.
* Standards either by the AICPA or the PCAOB or a combination of the two
* Must keep workpapers for 7 years from report release date
* A second partner is required to review all audit reports
* Audit reports must describe the scope of testing for I/C
* **104** - Provides for Quality Control *Peer Review **Inspections*** to be conducted by the board
* Must be performed **every year** for firms that provide **more than 100 audit reports** annualy
* Atleast **every 3 years if less than 100** annualy
* **105** - Gives Board authority to conduct investigations & obtain all relevant info
* Power to suspend auditors
* Revoke registration of acctg firms
* Impose penalties
* **106** - Regulates foreign public acctg firms furnishing an audit report to an issuer & requires them to comply with the board requests
* **107** - Gives SEC oversight & enforcement authority over the Board & its decisions
* **108** - Amends the Securities Act of 1933 to allow the SEC to adopt the accounting standards established by a standard setting body such as FASB.
* **109** - Calls for funding of the Board & the designated accounting standard-setting body (FASB) to be funded from fees imposed upon public companies
28
SOX - Title 1
104
**SOX Title 1 - Public Accounting Oversight Board (sections)**
* **101** - Establishes the board, consists of 5 full time members, exactly 2 are CPAs, all appointed by the SEC
* **102** - Requires public acctg firms to register with the PCAOB
* **103** - Authorizes the board to establish standards, quality control standards, & ethics standards to be used by registered acctg firms in the preparation & issuance of audit reports.
* Standards either by the AICPA or the PCAOB or a combination of the two
* Must keep workpapers for 7 years from report release date
* A second partner is required to review all audit reports
* Audit reports must describe the scope of testing for I/C
* **104** - Provides for Quality Control *Peer Review **Inspections*** to be conducted by the board
* Must be performed **every year** for firms that provide **more than 100 audit reports** annualy
* Atleast **every 3 years if less than 100** annualy
* **105** - Gives Board authority to conduct investigations & obtain all relevant info
* Power to suspend auditors
* Revoke registration of acctg firms
* Impose penalties
* **106** - Regulates foreign public acctg firms furnishing an audit report to an issuer & requires them to comply with the board requests
* **107** - Gives SEC oversight & enforcement authority over the Board & its decisions
* **108** - Amends the Securities Act of 1933 to allow the SEC to adopt the accounting standards established by a standard setting body such as FASB.
* **109** - Calls for funding of the Board & the designated accounting standard-setting body (FASB) to be funded from fees imposed upon public companies
29
SOX - Title 1
105
**SOX Title 1 - Public Accounting Oversight Board (sections)**
* **101** - Establishes the board, consists of 5 full time members, exactly 2 are CPAs, all appointed by the SEC
* **102** - Requires public acctg firms to register with the PCAOB
* **103** - Authorizes the board to establish standards, quality control standards, & ethics standards to be used by registered acctg firms in the preparation & issuance of audit reports.
* Standards either by the AICPA or the PCAOB or a combination of the two
* Must keep workpapers for 7 years from report release date
* A second partner is required to review all audit reports
* Audit reports must describe the scope of testing for I/C
* **104** - Provides for Quality Control *Peer Review **Inspections*** to be conducted by the board
* Must be performed **every year** for firms that provide **more than 100 audit reports** annualy
* Atleast **every 3 years if less than 100** annualy
* **105** - Gives Board authority to conduct investigations & obtain all relevant info
* Power to suspend auditors
* Revoke registration of acctg firms
* Impose penalties
* **106** - Regulates foreign public acctg firms furnishing an audit report to an issuer & requires them to comply with the board requests
* **107** - Gives SEC oversight & enforcement authority over the Board & its decisions
* **108** - Amends the Securities Act of 1933 to allow the SEC to adopt the accounting standards established by a standard setting body such as FASB.
* **109** - Calls for funding of the Board & the designated accounting standard-setting body (FASB) to be funded from fees imposed upon public companies
30
SOX - Title 1
106
**SOX Title 1 - Public Accounting Oversight Board (sections)**
* **101** - Establishes the board, consists of 5 full time members, exactly 2 are CPAs, all appointed by the SEC
* **102** - Requires public acctg firms to register with the PCAOB
* **103** - Authorizes the board to establish standards, quality control standards, & ethics standards to be used by registered acctg firms in the preparation & issuance of audit reports.
* Standards either by the AICPA or the PCAOB or a combination of the two
* Must keep workpapers for 7 years from report release date
* A second partner is required to review all audit reports
* Audit reports must describe the scope of testing for I/C
* **104** - Provides for Quality Control *Peer Review **Inspections*** to be conducted by the board
* Must be performed **every year** for firms that provide **more than 100 audit reports** annualy
* Atleast **every 3 years if less than 100** annualy
* **105** - Gives Board authority to conduct investigations & obtain all relevant info
* Power to suspend auditors
* Revoke registration of acctg firms
* Impose penalties
* **106** - Regulates foreign public acctg firms furnishing an audit report to an issuer & requires them to comply with the board requests
* **107** - Gives SEC oversight & enforcement authority over the Board & its decisions
* **108** - Amends the Securities Act of 1933 to allow the SEC to adopt the accounting standards established by a standard setting body such as FASB.
* **109** - Calls for funding of the Board & the designated accounting standard-setting body (FASB) to be funded from fees imposed upon public companies
31
SOX - Title 1
107
**SOX Title 1 - Public Accounting Oversight Board (sections)**
* **101** - Establishes the board, consists of 5 full time members, exactly 2 are CPAs, all appointed by the SEC
* **102** - Requires public acctg firms to register with the PCAOB
* **103** - Authorizes the board to establish standards, quality control standards, & ethics standards to be used by registered acctg firms in the preparation & issuance of audit reports.
* Standards either by the AICPA or the PCAOB or a combination of the two
* Must keep workpapers for 7 years from report release date
* A second partner is required to review all audit reports
* Audit reports must describe the scope of testing for I/C
* **104** - Provides for Quality Control *Peer Review **Inspections*** to be conducted by the board
* Must be performed **every year** for firms that provide **more than 100 audit reports** annualy
* Atleast **every 3 years if less than 100** annualy
* **105** - Gives Board authority to conduct investigations & obtain all relevant info
* Power to suspend auditors
* Revoke registration of acctg firms
* Impose penalties
* **106** - Regulates foreign public acctg firms furnishing an audit report to an issuer & requires them to comply with the board requests
* **107** - Gives SEC oversight & enforcement authority over the Board & its decisions
* **108** - Amends the Securities Act of 1933 to allow the SEC to adopt the accounting standards established by a standard setting body such as FASB.
* **109** - Calls for funding of the Board & the designated accounting standard-setting body (FASB) to be funded from fees imposed upon public companies
32
SOX - Title 1
108
**SOX Title 1 - Public Accounting Oversight Board (sections)**
* **101** - Establishes the board, consists of 5 full time members, exactly 2 are CPAs, all appointed by the SEC
* **102** - Requires public acctg firms to register with the PCAOB
* **103** - Authorizes the board to establish standards, quality control standards, & ethics standards to be used by registered acctg firms in the preparation & issuance of audit reports.
* Standards either by the AICPA or the PCAOB or a combination of the two
* Must keep workpapers for 7 years from report release date
* A second partner is required to review all audit reports
* Audit reports must describe the scope of testing for I/C
* **104** - Provides for Quality Control *Peer Review **Inspections*** to be conducted by the board
* Must be performed **every year** for firms that provide **more than 100 audit reports** annualy
* Atleast **every 3 years if less than 100** annualy
* **105** - Gives Board authority to conduct investigations & obtain all relevant info
* Power to suspend auditors
* Revoke registration of acctg firms
* Impose penalties
* **106** - Regulates foreign public acctg firms furnishing an audit report to an issuer & requires them to comply with the board requests
* **107** - Gives SEC oversight & enforcement authority over the Board & its decisions
* **108** - Amends the Securities Act of 1933 to allow the SEC to adopt the accounting standards established by a standard setting body such as FASB.
* **109** - Calls for funding of the Board & the designated accounting standard-setting body (FASB) to be funded from fees imposed upon public companies
33
SOX - Title 1
109
**SOX Title 1 - Public Accounting Oversight Board (sections)**
* **101** - Establishes the board, consists of 5 full time members, exactly 2 are CPAs, all appointed by the SEC
* **102** - Requires public acctg firms to register with the PCAOB
* **103** - Authorizes the board to establish standards, quality control standards, & ethics standards to be used by registered acctg firms in the preparation & issuance of audit reports.
* Standards either by the AICPA or the PCAOB or a combination of the two
* Must keep workpapers for 7 years from report release date
* A second partner is required to review all audit reports
* Audit reports must describe the scope of testing for I/C
* **104** - Provides for Quality Control *Peer Review **Inspections*** to be conducted by the board
* Must be performed **every year** for firms that provide **more than 100 audit reports** annualy
* Atleast **every 3 years if less than 100** annualy
* **105** - Gives Board authority to conduct investigations & obtain all relevant info
* Power to suspend auditors
* Revoke registration of acctg firms
* Impose penalties
* **106** - Regulates foreign public acctg firms furnishing an audit report to an issuer & requires them to comply with the board requests
* **107** - Gives SEC oversight & enforcement authority over the Board & its decisions
* **108** - Amends the Securities Act of 1933 to allow the SEC to adopt the accounting standards established by a standard setting body such as FASB.
* **109** - Calls for funding of the Board & the designated accounting standard-setting body (FASB) to be funded from fees imposed upon public companies
34
SOX - Title 2
201
**SOX Title 2 - Auditor Independence**
* **201** - ***Prohibits*** any registered public accounting firm from providing the following non-audit services to Audit clients
* ***Bookkeeping or other services related to the accounting records***
* Financial info systems design or implementation
* Appraisal/valuation services, fairness opinions
* Actuarial services
* Internal audit outsourcing services
* Mgmt functions or human resources
* Broker/dealer investment advisor
* Legal/Expert Services
* Tax Services are still permissable
* **202** - Requires the issuer's audit committee to preapprove all auditing & non-auditing services to be provided to an issuer
* **203** - Establishes mandatory & substantive *rotation of audit partner & partner responsible for review every 5 years*
* **204** - Requires audit firm to report to the client's audit committee:
* Critical accounting policies & practices
* Alternative acctg treatments
* Material written communications between auditor's firm & management of the issuer
* **206** - Prohibits the audit firm from providing audit services for issuer if the CEO, controller, CFO, or any person serving in the equivalent capacity was employed in the audit practice of the firm during the *1 year period prior to the audit*
35
SOX - Title 2
202
**SOX Title 2 - Auditor Independence**
* **201** - ***Prohibits*** any registered public accounting firm from providing the following non-audit services to Audit clients
* ***Bookkeeping or other services related to the accounting records***
* Financial info systems design or implementation
* Appraisal/valuation services, fairness opinions
* Actuarial services
* Internal audit outsourcing services
* Mgmt functions or human resources
* Broker/dealer investment advisor
* Legal/Expert Services
* Tax Services are still permissable
* **202** - Requires the issuer's audit committee to preapprove all auditing & non-auditing services to be provided to an issuer
* **203** - Establishes mandatory & substantive *rotation of audit partner & partner responsible for review every 5 years*
* **204** - Requires audit firm to report to the client's audit committee:
* Critical accounting policies & practices
* Alternative acctg treatments
* Material written communications between auditor's firm & management of the issuer
* **206** - Prohibits the audit firm from providing audit services for issuer if the CEO, controller, CFO, or any person serving in the equivalent capacity was employed in the audit practive of the firm during the *1 year period prior to the audit*
36
SOX - Title 2
203
**SOX Title 2 - Auditor Independence**
* **201** - ***Prohibits*** any registered public accounting firm from providing the following non-audit services to Audit clients
* ***Bookkeeping or other services related to the accounting records***
* Financial info systems design or implementation
* Appraisal/valuation services, fairness opinions
* Actuarial services
* Internal audit outsourcing services
* Mgmt functions or human resources
* Broker/dealer investment advisor
* Legal/Expert Services
* Tax Services are still permissable
* **202** - Requires the issuer's audit committee to preapprove all auditing & non-auditing services to be provided to an issuer
* **203** - Establishes mandatory & substantive *rotation of audit partner & partner responsible for review every 5 years*
* **204** - Requires audit firm to report to the client's audit committee:
* Critical accounting policies & practices
* Alternative acctg treatments
* Material written communications between auditor's firm & management of the issuer
* **206** - Prohibits the audit firm from providing audit services for issuer if the CEO, controller, CFO, or any person serving in the equivalent capacity was employed in the audit practive of the firm during the *1 year period prior to the audit*
37
SOX - Title 2
204
**SOX Title 2 - Auditor Independence**
* **201** - ***Prohibits*** any registered public accounting firm from providing the following non-audit services to Audit clients
* ***Bookkeeping or other services related to the accounting records***
* Financial info systems design or implementation
* Appraisal/valuation services, fairness opinions
* Actuarial services
* Internal audit outsourcing services
* Mgmt functions or human resources
* Broker/dealer investment advisor
* Legal/Expert Services
* Tax Services are still permissable
* **202** - Requires the issuer's audit committee to preapprove all auditing & non-auditing services to be provided to an issuer
* **203** - Establishes mandatory & substantive *rotation of audit partner & partner responsible for review every 5 years*
* **204** - Requires audit firm to report to the client's audit committee:
* Critical accounting policies & practices
* Alternative acctg treatments
* Material written communications between auditor's firm & management of the issuer
* **206** - Prohibits the audit firm from providing audit services for issuer if the CEO, controller, CFO, or any person serving in the equivalent capacity was employed in the audit practive of the firm during the *1 year period prior to the audit*
38
SOX - Title 2
206
**SOX Title 2 - Auditor Independence**
* **201** - ***Prohibits*** any registered public accounting firm from providing the following non-audit services to Audit clients
* ***Bookkeeping or other services related to the accounting records***
* Financial info systems design or implementation
* Appraisal/valuation services, fairness opinions
* Actuarial services
* Internal audit outsourcing services
* Mgmt functions or human resources
* Broker/dealer investment advisor
* Legal/Expert Services
* Tax Services are still permissable
* **202** - Requires the issuer's audit committee to preapprove all auditing & non-auditing services to be provided to an issuer
* **203** - Establishes mandatory & substantive *rotation of audit partner & partner responsible for review every 5 years*
* **204** - Requires audit firm to report to the client's audit committee:
* Critical accounting policies & practices
* Alternative acctg treatments
* Material written communications between auditor's firm & management of the issuer
* **206** - Prohibits the audit firm from providing audit services for issuer if the CEO, controller, CFO, or any person serving in the equivalent capacity was employed in the audit practive of the firm during the *1 year period prior to the audit*
39
SOX - Title 3
301
**SOX Title 3 - Corporate Responsiblity**
* **301** - Makes audit committee, which must be independent, responsible for appointment, compensation, & oversight of any audit work
* Allows the SEC to de-list any issuer not in compliance w/ Title 3
* **302** - Requires principal executive & principal financial officers to certify, in each annual or quarterly report:
* They have reviewed the report
* Report does not contain any untrue stmt of material fact or ommission of a material fact
* Financial position & results of operations are fairly presented
* **303** - Prohibits an officer/director of an issuer to fraudulently influence, coerce, manipulatte, or mislead the auditor
* **304** - (**Clawback Rule**) Requires executives of an issuer to forfeit any bonus or incentive based pay or profits from the sale of stock, rec'd in the 12 months period after the date of issuance of FS subject to an earnings re-statement
* **305** - The SEC may bar any person who has violated federal securities laws from serving as an officer or director of an issuer
* **306** - Prohibits trading by officers/directors during blackout periods established between the end of a quarter & the earnings report date
40
SOX - Title 3
302
**SOX Title 3 - Corporate Responsiblity**
* **301** - Makes audit committee, which must be independent, responsible for appointment, compensation, & oversight of any audit work
* Allows the SEC to de-list any issuer not in compliance w/ Title 3
* **302** - Requires principal executive & principal financial officers to certify, in each annual or quarterly report:
* They have reviewed the report
* Report does not contain any untrue stmt of material fact or ommission of a material fact
* Financial position & results of operations are fairly presented
* **303** - Prohibits an officer/director of an issuer to fraudulently influence, coerce, manipulatte, or mislead the auditor
* **304** - (**Clawback Rule**) Requires executives of an issuer to forfeit any bonus or incentive based pay or profits from the sale of stock, rec'd in the 12 months period after the date of issuance of FS subject to an earnings re-statement
* **305** - The SEC may bar any person who has violated federal securities laws from serving as an officer or director of an issuer
* **306** - Prohibits trading by officers/directors during blackout periods established between the end of a quarter & the earnings report date
41
SOX - Title 3
303
**SOX Title 3 - Corporate Responsiblity**
* **301** - Makes audit committee, which must be independent, responsible for appointment, compensation, & oversight of any audit work
* Allows the SEC to de-list any issuer not in compliance w/ Title 3
* **302** - Requires principal executive & principal financial officers to certify, in each annual or quarterly report:
* They have reviewed the report
* Report does not contain any untrue stmt of material fact or ommission of a material fact
* Financial position & results of operations are fairly presented
* **303** - Prohibits an officer/director of an issuer to fraudulently influence, coerce, manipulatte, or mislead the auditor
* **304** - (**Clawback Rule**) Requires executives of an issuer to forfeit any bonus or incentive based pay or profits from the sale of stock, rec'd in the 12 months period after the date of issuance of FS subject to an earnings re-statement
* **305** - The SEC may bar any person who has violated federal securities laws from serving as an officer or director of an issuer
* **306** - Prohibits trading by officers/directors during blackout periods established between the end of a quarter & the earnings report date
42
SOX - Title 3
304
**SOX Title 3 - Corporate Responsiblity**
* **301** - Makes audit committee, which must be independent, responsible for appointment, compensation, & oversight of any audit work
* Allows the SEC to de-list any issuer not in compliance w/ Title 3
* **302** - Requires principal executive & principal financial officers to certify, in each annual or quarterly report:
* They have reviewed the report
* Report does not contain any untrue stmt of material fact or ommission of a material fact
* Financial position & results of operations are fairly presented
* **303** - Prohibits an officer/director of an issuer to fraudulently influence, coerce, manipulatte, or mislead the auditor
* **304** - (**Clawback Rule**) Requires executives of an issuer to forfeit any bonus or incentive based pay or profits from the sale of stock, rec'd in the 12 months period after the date of issuance of FS subject to an earnings re-statement
* **305** - The SEC may bar any person who has violated federal securities laws from serving as an officer or director of an issuer
* **306** - Prohibits trading by officers/directors during blackout periods established between the end of a quarter & the earnings report date
43
SOX - Title 3
305
**SOX Title 3 - Corporate Responsiblity**
* **301** - Makes audit committee, which must be independent, responsible for appointment, compensation, & oversight of any audit work
* Allows the SEC to de-list any issuer not in compliance w/ Title 3
* **302** - Requires principal executive & principal financial officers to certify, in each annual or quarterly report:
* They have reviewed the report
* Report does not contain any untrue stmt of material fact or ommission of a material fact
* Financial position & results of operations are fairly presented
* **303** - Prohibits an officer/director of an issuer to fraudulently influence, coerce, manipulatte, or mislead the auditor
* **304** - (**Clawback Rule**) Requires executives of an issuer to forfeit any bonus or incentive based pay or profits from the sale of stock, rec'd in the 12 months period after the date of issuance of FS subject to an earnings re-statement
* **305** - The SEC may bar any person who has violated federal securities laws from serving as an officer or director of an issuer
* **306** - Prohibits trading by officers/directors during blackout periods established between the end of a quarter & the earnings report date
44
SOX - Title 3
306
**SOX Title 3 - Corporate Responsiblity**
* **301** - Makes audit committee, which must be independent, responsible for appointment, compensation, & oversight of any audit work
* Allows the SEC to de-list any issuer not in compliance w/ Title 3
* **302** - Requires principal executive & principal financial officers to certify, in each annual or quarterly report:
* They have reviewed the report
* Report does not contain any untrue stmt of material fact or ommission of a material fact
* Financial position & results of operations are fairly presented
* **303** - Prohibits an officer/director of an issuer to fraudulently influence, coerce, manipulatte, or mislead the auditor
* **304** - (**Clawback Rule**) Requires executives of an issuer to forfeit any bonus or incentive based pay or profits from the sale of stock, rec'd in the 12 months period after the date of issuance of FS subject to an earnings re-statement
* **305** - The SEC may bar any person who has violated federal securities laws from serving as an officer or director of an issuer
* **306** - Prohibits trading by officers/directors during blackout periods established between the end of a quarter & the earnings report date
45
SOX - Title 4
401
**SOX Title 4 - Enhanced Financial Disclosures**
* **401** - Req's all FS prepared in accordance w/ GAAP to reflect all material adjustments identified by the auditors
* **402** - Prohibits personal loans to directors, executive, or officers
* **403** - Req's directors, officers, & principal shareholders to disclose the amount of all equity securities in which they hold a beneficial interest & any changes in their interest since the previous filing
* **404** - Req's that mgmt acknowledge its responsiblity for establishing & maintaining adequate I/C over financial reporting & that mgmt asses the effectiveness of I/C
* **405** - Exempts investment companies registered under the Investment Company Act of 1940 from sections 401, 402, 403
* **406** - Req's an issuer to disclose whether or not it has adopted a code of ethics for senior financial officers, & if not, the reasons for not having done so
* **407** - Must disclose whether atleast 1 member of the audit committee is a "financial expert"
* **408** - Provides for enhanced review of periodic disclosures by the Board
* **409** - Req's issuers to disclose material changes in the financial condition or operations on a rapid & current basis
46
SOX - Title 4
402
**SOX Title 4 - Enhanced Financial Disclosures**
* **401** - Req's all FS prepared in accordance w/ GAAP to reflect all material adjustments identified by the auditors
* **402** - Prohibits personal loans to directors, executive, or officers
* **403** - Req's directors, officers, & principal shareholders to disclose the amount of all equity securities in which they hold a beneficial interest & any changes in their interest since the previous filing
* **404** - Req's that mgmt acknowledge its responsiblity for establishing & maintaining adequate I/C over financial reporting & that mgmt asses the effectiveness of I/C
* **405** - Exempts investment companies registered under the Investment Company Act of 1940 from sections 401, 402, 403
* **406** - Req's an issuer to disclose whether or not it has adopted a code of ethics for senior financial officers, & if not, the reasons for not having done so
* **407** - Must disclose whether atleast 1 member of the audit committee is a "financial expert"
* **408** - Provides for enhanced review of periodic disclosures by the Board
* **409** - Req's issuers to disclose material changes in the financial condition or operations on a rapid & current basis
47
SOX - Title 4
403
**SOX Title 4 - Enhanced Financial Disclosures**
* **401** - Req's all FS prepared in accordance w/ GAAP to reflect all material adjustments identified by the auditors
* **402** - Prohibits personal loans to directors, executive, or officers
* **403** - Req's directors, officers, & principal shareholders to disclose the amount of all equity securities in which they hold a beneficial interest & any changes in their interest since the previous filing
* **404** - Req's that mgmt acknowledge its responsiblity for establishing & maintaining adequate I/C over financial reporting & that mgmt asses the effectiveness of I/C
* **405** - Exempts investment companies registered under the Investment Company Act of 1940 from sections 401, 402, 403
* **406** - Req's an issuer to disclose whether or not it has adopted a code of ethics for senior financial officers, & if not, the reasons for not having done so
* **407** - Must disclose whether atleast 1 member of the audit committee is a "financial expert"
* **408** - Provides for enhanced review of periodic disclosures by the Board
* **409** - Req's issuers to disclose material changes in the financial condition or operations on a rapid & current basis
48
SOX - Title 4
404
**SOX Title 4 - Enhanced Financial Disclosures**
* **401** - Req's all FS prepared in accordance w/ GAAP to reflect all material adjustments identified by the auditors
* **402** - Prohibits personal loans to directors, executive, or officers
* **403** - Req's directors, officers, & principal shareholders to disclose the amount of all equity securities in which they hold a beneficial interest & any changes in their interest since the previous filing
* **404** - Req's that mgmt acknowledge its responsiblity for establishing & maintaining adequate I/C over financial reporting & that mgmt asses the effectiveness of I/C
* **405** - Exempts investment companies registered under the Investment Company Act of 1940 from sections 401, 402, 403
* **406** - Req's an issuer to disclose whether or not it has adopted a code of ethics for senior financial officers, & if not, the reasons for not having done so
* **407** - Must disclose whether atleast 1 member of the audit committee is a "financial expert"
* **408** - Provides for enhanced review of periodic disclosures by the Board
* **409** - Req's issuers to disclose material changes in the financial condition or operations on a rapid & current basis
49
SOX - Title 4
405
**SOX Title 4 - Enhanced Financial Disclosures**
* **401** - Req's all FS prepared in accordance w/ GAAP to reflect all material adjustments identified by the auditors
* **402** - Prohibits personal loans to directors, executive, or officers
* **403** - Req's directors, officers, & principal shareholders to disclose the amount of all equity securities in which they hold a beneficial interest & any changes in their interest since the previous filing
* **404** - Req's that mgmt acknowledge its responsiblity for establishing & maintaining adequate I/C over financial reporting & that mgmt asses the effectiveness of I/C
* **405** - Exempts investment companies registered under the Investment Company Act of 1940 from sections 401, 402, 403
* **406** - Req's an issuer to disclose whether or not it has adopted a code of ethics for senior financial officers, & if not, the reasons for not having done so
* **407** - Must disclose whether atleast 1 member of the audit committee is a "financial expert"
* **408** - Provides for enhanced review of periodic disclosures by the Board
* **409** - Req's issuers to disclose material changes in the financial condition or operations on a rapid & current basis
50
SOX - Title 4
406
**SOX Title 4 - Enhanced Financial Disclosures**
* **401** - Req's all FS prepared in accordance w/ GAAP to reflect all material adjustments identified by the auditors
* **402** - Prohibits personal loans to directors, executive, or officers
* **403** - Req's directors, officers, & principal shareholders to disclose the amount of all equity securities in which they hold a beneficial interest & any changes in their interest since the previous filing
* **404** - Req's that mgmt acknowledge its responsiblity for establishing & maintaining adequate I/C over financial reporting & that mgmt asses the effectiveness of I/C
* **405** - Exempts investment companies registered under the Investment Company Act of 1940 from sections 401, 402, 403
* **406** - Req's an issuer to disclose whether or not it has adopted a code of ethics for senior financial officers, & if not, the reasons for not having done so
* **407** - Must disclose whether atleast 1 member of the audit committee is a "financial expert"
* **408** - Provides for enhanced review of periodic disclosures by the Board
* **409** - Req's issuers to disclose material changes in the financial condition or operations on a rapid & current basis
51
SOX - Title 4
407
**SOX Title 4 - Enhanced Financial Disclosures**
* **401** - Req's all FS prepared in accordance w/ GAAP to reflect all material adjustments identified by the auditors
* **402** - Prohibits personal loans to directors, executive, or officers
* **403** - Req's directors, officers, & principal shareholders to disclose the amount of all equity securities in which they hold a beneficial interest & any changes in their interest since the previous filing
* **404** - Req's that mgmt acknowledge its responsiblity for establishing & maintaining adequate I/C over financial reporting & that mgmt asses the effectiveness of I/C
* **405** - Exempts investment companies registered under the Investment Company Act of 1940 from sections 401, 402, 403
* **406** - Req's an issuer to disclose whether or not it has adopted a code of ethics for senior financial officers, & if not, the reasons for not having done so
* **407** - Must disclose whether atleast 1 member of the audit committee is a "financial expert"
* **408** - Provides for enhanced review of periodic disclosures by the Board
* **409** - Req's issuers to disclose material changes in the financial condition or operations on a rapid & current basis
52
SOX - Title 4
408
**SOX Title 4 - Enhanced Financial Disclosures**
* **401** - Req's all FS prepared in accordance w/ GAAP to reflect all material adjustments identified by the auditors
* **402** - Prohibits personal loans to directors, executive, or officers
* **403** - Req's directors, officers, & principal shareholders to disclose the amount of all equity securities in which they hold a beneficial interest & any changes in their interest since the previous filing
* **404** - Req's that mgmt acknowledge its responsiblity for establishing & maintaining adequate I/C over financial reporting & that mgmt asses the effectiveness of I/C
* **405** - Exempts investment companies registered under the Investment Company Act of 1940 from sections 401, 402, 403
* **406** - Req's an issuer to disclose whether or not it has adopted a code of ethics for senior financial officers, & if not, the reasons for not having done so
* **407** - Must disclose whether atleast 1 member of the audit committee is a "financial expert"
* **408** - Provides for enhanced review of periodic disclosures by the Board
* **409** - Req's issuers to disclose material changes in the financial condition or operations on a rapid & current basis
53
SOX - Title 4
409
**SOX Title 4 - Enhanced Financial Disclosures**
* **401** - Req's all FS prepared in accordance w/ GAAP to reflect all material adjustments identified by the auditors
* **402** - Prohibits personal loans to directors, executive, or officers
* **403** - Req's directors, officers, & principal shareholders to disclose the amount of all equity securities in which they hold a beneficial interest & any changes in their interest since the previous filing
* **404** - Req's that mgmt acknowledge its responsiblity for establishing & maintaining adequate I/C over financial reporting & that mgmt asses the effectiveness of I/C
* **405** - Exempts investment companies registered under the Investment Company Act of 1940 from sections 401, 402, 403
* **406** - Req's an issuer to disclose whether or not it has adopted a code of ethics for senior financial officers, & if not, the reasons for not having done so
* **407** - Must disclose whether atleast 1 member of the audit committee is a "financial expert"
* **408** - Provides for enhanced review of periodic disclosures by the Board
* **409** - Req's issuers to disclose material changes in the financial condition or operations on a rapid & current basis
