Question

what are some challenges that publicly traded companies have encountered in implementing the changes that Sarbanes-Oxley has mandated related to audit committees?

Answer 1

The Sarbanes-Oxley Act of 2002 mandates the audit committees to be responsible directly for the oversight of the engagement of the independent auditor in the company, and the Securities and Exchange Commission (the Commission) rules are designed for ensuring that auditors are independent of management, and add new responsibilities such as approving various audit and non-audit services, selecting and overseeing external auditors, and handling complaints related to the accounting practices of the management. The main aim of this brochure is to highlight some Commission rules and other authoritative pronouncements relevant to audit committee oversight responsibilities related to the independence of the auditor.

The main challenge part that publicly traded companies have encountered in implementing the changes that Sarbanes-Oxley is Section 404, which instructs public companies to perform extensive internal control tests and also an inclusion of the internal control report along with the annual audits. However the testing and documenting manually and automated controls in financial reporting need enormous effort and involvement of not only external accountants, but also well qualified IT personnel. As a result the compliance cost is especially burdensome for public companies especially for those which heavily rely on manual controls