In: Accounting
Summarize and compare the regulatory efforts of The Sarbanes-Oxley Act of 2002
Regulatory efforts of The Sarbanes-Oxley Act of 2002 are:-
1. International Authority. Foreign accounting firms that "prepare or furnish" an audit report involving U.S. registrants will be subject to the authority of the Board.
2. Auditors Report to Audit Committee. Now, auditors will report to and be overseen by a company's audit committee, not management.
3. Audit Partner Rotation. The lead audit partner and audit review partner must be rotated every five years on public company engagements.
4. Audit Reports Must Contain Description of Internal Controls Testing. The new regulatory board will also issue or adopt standards that will require every audit report to attest to the assessment made by management on the company's internal control structures, including a specific notation about any significant defects or material noncompliance found on the basis of such testing.
5. Management Assessment of Internal Controls. Management must now assess and make representations about the effectiveness of the internal control structure and procedures of the issuer for financial reporting.
6. Additional Burdens for CPAs in Business and Industry. CPAs working in the financial management areas of public companies are directly impacted by the Act. These CPAs need to be aware of the new responsibilities of CEOs and CFOs, who are now required to certify company financial statements.
7. Section 802 of SOX- Section 802 of the SOX Act of 2002 contains the three rules that affect record keeping. The first deals with destruction and falsification of records. The second strictly defines the retention period for storing records. The third rule outlines the specific business records that companies need to store, which includes electronic communications.