Sarbanes-Oaxly Act Of 2002 Flashcards
What were the effects of Sarbanes Oxley Act (SOX Act) of 2002 on public companies?
Created corporate responsibility
Enhanced disclosures
Identified fraud
Title III (Corporate Responsibility) section of the SOX Act relates to:
The establishment of an audit committee and a CFO/CEO representation
Who is responsible for the appointment, compensation, and oversight of the work of the public accounting firm employed by the company?
The audit committee
An auditor reports directly to who within the company?
The audit committee
NOT the board
Who is responsible for resolving disputes between the auditor and management?
The audit committee
Audit committee members are to be members of what?
The issuers board of directors, but are to remain otherwise independent
Who is responsible for establishing procedures to accept reports or complaints regarding audit, accounting, or internal control issues as well as have a method of addressing said reports?
The audit committee
Who must sign certain representations regarding annual and quarterly reports?
CEO and cfo
When signing the reports, the CFO and CEO assert that they have made the following disclosures to the issuer’s auditors an audit committee:
All significant deficiencies and material weaknesses in the design or operation of internal controls.
Any fraud.
Significant changes to internal controls.
If an issuer is required to prepare an accounting restatement due to material noncompliance, the CEO and CFO may be required to reimburse the issuer:
Bonuses or incentive-based or equity-based compensations, or gains on sale of securities during that 12 month period
Enhanced financial disclosures include:
Additional details
Enhanced disclosure requirements include:
All material correcting adjustments identified by the auditor (externally identified)
All material off-balance sheet transactions (operating leases, contingent obligations, and relationships with unconsolidated subsidiaries)
Who is prohibited from making personal loans to directors or executive officers?
Issuers
EXCEPTION: if the consumer credit loans are made in the ordinary course of business
Disclosures are required for persons who have direct or indirect ownership of what amount?
More than 10 percent
Who is responsible for establishing and maintaining an adequate internal control structure?
Management
Who must disclose whether the issuer has adopted a code of conduct for senior officers?
The issuer
The code of ethics for senior officers must promote:
Honest and ethical conduct
Full, fair, accurate, and timely disclosures in periodic financial reports
Compliance with laws, rules, and regulations
At least one member of the audit committee should be a what?
Financial expert
The financial expert should have knowledge of:
GAAP
Experience in the preparation or auditing of financial statements
Application of GAAP
Experience with Internal controls
Understanding of audit committee functions
Who is required to review disclosures made by issuers on a regular basis for the protection of investors?
The Securities and Exchange Commission (SEC)
The SEC should consider the following when scheduling reviews of disclosures by issuers:
Material restatements
Significant volatility in stock prices
Largest market capitalizations
Issuers whose operations significantly affect any material section of the economy
What are the criminal penalties for altering documents?
Fined and/or imprisoned for up to 20 years
What is the statute of limitations for securities fraud?
The earlier of 2 years after the discovery or 5 years after the violation
(2 and 5 rule)
Criminal penalties fo securities fraud include:
Fined and/or imprisoned for up to 25 years
Who reviews and amends, as needed, the Federal Sentencing Guidelines and policy statements to carry out the provision of the Attempt to Conspiracy Act?
The United States Sentencing Commission
Any party that certifies a financial report knowing that it does not satisfy all the requirements will be fined and/or imprisoned based on the following:
Certifies: fined up to $1,000,000 and/or imprisoned for up to 10 years
Willfully Certifies: fined up to $5,000,000 and/or imprisoned for up to 20 years
Penalties for tampering with record or impeding and official proceeding include:
Fined and/or imprisoned for up to 20 years
