Sarbanes-Oxley Case Study

1. DESCRIBE REQUIREMENT OF AUDIT COMMITTEE IN SOX

The Sarbanes-Oxley act of 2002 supports the increase of public confidence in capital markets by looking for the improvement of corporate governance, internal controls and audit quality. Basic requirements for sox audit committee can be classified into five key parts such as authority and responsibility, purchasing services from the independent registered public accounting firm/ outside audit, retaining auditors, materials available, disclosure related to its operations. The audit committee’s responsibilities and authority were increased. Hence audit committees require the companies to disclosure whether or not a financial expert is member of the committee. One of the requirements was that the Commission encouraged the use of audit committees composed of independent directors. They explained that a committee with independent directors on board was in better position to assess objectively the quality of the issuer 's financial disclosure and the

DESCRIBE REQUIREMENTS FOR INTERNAL CONTROLS IN SOX

Sox necessitate management of public company to implement an adequate system of internal controls over their financial reporting process. This includes controls over transaction processing system that feed data to the financial reporting system (302 and 404). The core objectives of internal control include: Safe guard assets of the company, guarantee accuracy and reliability of accounting records and information, support efficiency in the company’s operations measure compliance with management prescribed policies and procedures.

In Section 302, the CEO and CFO must personally certify that financial reports are exact and complete. They must also assess and report on the effectiveness of internal controls around financial reporting. This section clearly places responsibility for accurate financial reporting on the highest level of corporate management. CEOs and CFOs now face the potential for criminal fraud