Sarbanes Oxley Act of 2002

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  • Topic: U.S. Securities and Exchange Commission, Financial statements, Audit
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  • Published : February 6, 2013
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Summary of the Provisions of the Sarbanes-Oxley Act of 2002

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Summary of the Provisions of the Sarbanes-Oxley Act of 2002
Published June 22, 2006

The following summaries describe key provisions of the Sarbanes-Oxley Act. Section 3: Commission Rules and Enforcement.
A violation of Rules of the Public Company Accounting Oversight Board ("Board") is treated as a violation of the '34 Act, giving rise to the same penalties that may be imposed for violations of that Act.

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The Board will have five financially-literate members, appointed for five-year terms. Two of the members must be or have been certified public accountants, and the remaining three must not be and cannot have been CPAs. The Chair may be held by one of the CPA members, provided that he or she has not been engaged as a practicing CPA for five years. The Board's members will serve on a full-time basis.

No member may, concurrent with service on the Board, "share in any of the profits of, or receive payments from, a public accounting firm," other than "fixed continuing payments," such as retirement payments.

Members of the Board are appointed by the Commission, "after consultation with" the Chairman of the Federal Reserve Board and the Secretary of the Treasury. Members may be removed by the Commission "for good cause."

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Section 103: Auditing, Quality Control, and Independence Standards and Rules. The Board shall:
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(2) establish, or adopt, by rule, "auditing, quality control, ethics, independence, and other standards relating t  epe aai  f u i e ot frsu r;
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(3) conduct inspections of a c u t gfms
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(4) conduct investigations and disciplinary proceedings, a di o ea po r t  n t n ; n   s  p rpi es co s
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(5) perform such other duties or functions a  e e s r r p rpi e s c say   po r t;
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(6) enforce compliance with the Act, the rules of the Board, professional standards, and the securities laws relating to the preparation and issuance of audit reports and the obligations and liabilities of a c u tns i   s e th rt;

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(7) set the budget and manage the operations of the Board and the staff of the Board. Auditing standards. The Board would be required to "cooperate on an on-going basis" with designated professional groups of accountants and any advisory groups convened in connection with standard-setting, and although the Board can "to the extent that it determines appropriate" adopt standards proposed by those groups, the Board will have authority to amend, modify, repeal, and reject any standards suggested by the groups. The Board must report on its standard-setting activity to the Commission on an annual basis. The Board must require registered public accounting firms to "prepare, and maintain for a period of not less than 7 years, audit work papers, and other information related to any audit report, in sufficient detail to support the conclusions reached in such report." The Board must require a 2nd partner review and approval of audit reports registered accounting firms must adopt quality control standards.

The Board must adopt an audit standard to implement the internal control review required by section 404(b). This standard must require the auditor evaluate whether the internal control structure and procedures include records that accurately and fairly reflect the transactions of the

http://www.aicpa.org/interestareas/forensicandvaluation/resources/fraudpreventiondetectio ... 1/23/2013

Summary of the Provisions of the Sarbanes-Oxley Act of 2002

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issuer, provide reasonable assurance that the transactions are recorded in a manner that will permit the preparation of financial statements in...
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