Sec's Rule 78j-1

The financial reporting process needs oversight to function effectively. The audit committee is vital to that oversight process. While management is responsible for the daily operation of the company, the audit committee, in its oversight role, serves “as a check and balance on a company's financial reporting system” [SEC Release No. 33-8220 (4/25/2003)]. The audit committee helps to ensure that policies, procedures, and internal controls exist and are functioning properly within the risk parameters established. Duties encompass the independent review and oversight of the company's financial reporting processes, internal controls and independent auditors [SEC Release 33-8220]. For U.S. publicly-held companies, audit committee responsibilities are mandated or guided by the board, the committee’s charter, applicable listing requirements of the NYSE or NASDAQ; Securities and Exchange Commission rules; applicable federal and state laws; and common practices. While a complete delineation of these requirements is beyond the scope of this article, this series will focus on SEC’s Rule 10A-3 which implements the requirements of Section 10A(m) of the Securities Exchange Act of 1934 [15 U.S.C. 78j-1(m)] as mandated by Section 3 of the Sarbanes-Oxley Act of 2002 [15 U.S.C. 7202] relating to audit committee standards. The series will further highlight some of the additional
The Sarbanes-Oxley Act of 2002 directed the SEC to adopt a new rule to require national securities exchanges and national securities associations to prohibit listing an issuer’s security unless the issuer complies with audit committee requirements relating to independence; overseeing the independent auditor; establishing procedures to handle complaints regarding accounting, internal accounting controls, or auditing matters; the authority to engage counsel and other advisers; and funding for the independent auditor and outside advisers as the committee deems necessary [See Exhibit