1 / 12

Sarbanes-Oxley Act of 2002

Sarbanes-Oxley Act of 2002. Paul Sarbanes. Maryland’s Democratic Senior Senator Chairman of the Senate Banking, Housing, and Urban Affairs Committee Pushed for the establishment of an accounting oversight board. Michael Oxley. Congressman, Fourth Ohio District

sunee
Download Presentation

Sarbanes-Oxley Act of 2002

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Sarbanes-Oxley Act of 2002

  2. Paul Sarbanes • Maryland’s Democratic Senior Senator • Chairman of the Senate Banking, Housing, and Urban Affairs Committee • Pushed for the establishment of an accounting oversight board

  3. Michael Oxley • Congressman, Fourth Ohio District • Chairman of the House Committee on Financial Services • Oxley’s committee was the first to hold hearings on the fraud at Enron and WorldCom

  4. Purpose of the Legislation • To ensure auditor independence • To provide higher levels of accuracy in corporate financial reporting • To promote responsible conduct on the part of corporate officers and directors, auditors, and securities analysts

  5. Public Company Accounting Oversight Board • Appointed and overseen by the SEC • Made up of five, full-time members • Only two of the members can be CPAs • Funded by public companies through mandatory fees • Audit firms must register and pay annual fees

  6. Setting the Standards • The Board will issue/adopt standards set by other groups or organizations • Quality control • Ethics • Independence • Standards “necessary” to protect the public interest

  7. The Accounting Police • The Board is empowered to regularly inspect the operations of accounting firms • Investigate potential violations of securities laws, standards, competency and conduct

  8. The Greater Role of the Audit Committee • The Act requires auditors to be hired and overseen by an audit committee • Members of the audit committee must be independent of the CEO and other corporate executives • The audit committee must approve all services to be performed by the accounting firm

  9. The CEO & CFO Must • Certify that the corporation’s financial reports fairly present the company’s operations and financial condition • Divulge bonuses, other incentive based-bonuses, and profits on stock sales

  10. The CEO & CFO Must Not • Coerce auditors into creating misleading financial statements • Accept loans from the company

  11. The New Role of the Auditor • Lead audit partners must be rotated every five years • A second auditor must provide a thorough second review of every audit report • Cannot offer certain non-audit services to clients • Must maintain audit workpapers for at least five years

  12. Non-Compliance: Ernst & Young • Violated auditor independence rules by working too closely with an audit client • A judge barred E&Y from accepting new SEC-registered audit clients for six months • Pay $1.7 million in disgorgement

More Related