Other Regulatory Frameworks & Provisions Flashcards
To better understand SOX.
List the important requirements for the board of directors per SOX Act of 2002.
- BOD must have an audit committee
- Audit committee members must be all INDEPENDENT (at least 3 people on this committee)
- Required at least one “financial expert”
Who in a public company must certify the accuracy of their firms’ financial statements as filed with the SEC?
CFO and CEO
What are some things that a company CEO or CFO must certify?
- Establishing & maintaining their firm’s internal controls
- Accuracy of their firm’s financial statements
Public company auditors must audit their clients?
Financial statements & internal controls
The audit committee is required to have one?
Financial expert who understand GAAP and financial statements
When it comes to filing the firm’s 10-K report, the CEO and CFO must do what following these?
- Reviewed the report
- CEO & CFO are responsible for establishing and maintaining internal controls
- Evaluated the effectiveness of the firm’s internal controls
- Report is stated fairly without material mistakes
What are some of the requirements for the financial expert on the audit committee?
- Understanding of GAAP & financial statements
- Experience in preparing or auditing financial statements
- Experience with internal auditing controls
- Understanding of audit committee functions
What organization was established by the SOX act of 2002 to control the auditing profession?
PCAOB
What would constitute a breach fiduciary duty by one or more members of the board of directors?
A director appropriating a business opportunity for himself or herself. Ex. Acquire retail space.
What are things that would not constitute a fiduciary duty by members of the BOD?
- Deciding whether or not a company pays dividends
- Meeting attendance. Missing meetings. Not required or expected of BOD
- A transaction with full disclosure, fair price, and unanimous approval by the board
