R8 Sarbanes-Oxley Act of 2002 Flashcards
What is the purpose of SOX?
it was created due to the collapse of major corporations like Enron and WorldCom and the restatement of financial statements of a number of other SEC reporting companies
What is the PCAOB?
It is composed of 5 member, 2 CPAs and 3 non CPAs and never been CPAs they register public accounting firms to prepare audits for SEC companies and establish rules relating the preparation of audit report and conduct inspections, investigations and disciplinary procedures regarding registered public accounting firms
What are the PCAOB standards that public accounting firms must adhere to?
- Audit documentation must be kept for 7 years
- Provide a concurrent or second partner review for each audit
- Describe in audit reports the scope of the testing of the issuer’s internal control structure and procedures
Which firms that the PCAOB inspect and when?
The PCAOB inspects all public accounting firms:
- Audit more than 100 issues : annually
- Audit less than 100: every 3 years
What services are allowed for a public accounting firm to provide in conjunction with auditing services?
Tax services IF pre approved by audit committee
What do issuer must do regarding a Code of Ethics?
Issuers must disclose whether or not they have adopted a code of ethics for senior officer, if no code of conduct they must disclose the reason
What do issuers must do regarding a financial expert in the audit committee?
At least one member of the audit committee should be a financial expert, financial reports must disclose the existence of a financial expert on the committee or the reason why they don’t have one.
What is the purpose f the financial expert in the audit committee?
to benefit the audit committee by enhancing the level of sophistication that the expert can provide and make available to the comittee
