Summary of Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act (SOX) was passed by Congress in 2002 (www.sarbanesoxley. com). The Act, along with subsequent regulations adopted in 2003 and 2004, affected the responsibilities of auditors, boards of directors, and corporate managers with respect to financial reporting. Also, the act established the Public Companies
Accounting Oversight Board (PCAOB) that is now responsible for oversight of financial statement audits of publicly-traded corporations and the establishment of auditing standards in the U.S. The primary purpose of SOX was to increase investor confidence in the financial reports provided by corporations. To achieve this purpose, the Act established the PCAOB to oversee external auditing and corporate governance issues that potentially affect the reliability of financial reports. Further, SOX increased the responsibilities of corporate managers for producing reliable financial reports and specified restrictions on the activities of external auditors to increase their independence from their audit clients.
Though there are many provisions in the legislation and subsequent regulations, three issues are of primary importance for accounting. These involve the financial reporting responsibilities of the PCAOB, corporations (including their boards of directors and managers), and external auditors.
Responsibilities of the Public Companies Accounting Oversight Board
The PCAOB (www.pcaob.com) reports to the Securities and Exchange Commission
(SEC), which appoints members of the Board. The Board has five full-time members.
The Board establishes auditing standards for external audits of publicly traded companies and oversees the accounting firms that provide these audits. Accounting firms that provide external audits of companies that report to the SEC must register with the PCAOB and report to the PCAOB information about their audit clients, audit fees, and the services provided to clients. As part of its oversight responsibilities
Accounting Oversight Board (PCAOB) that is now responsible for oversight of financial statement audits of publicly-traded corporations and the establishment of auditing standards in the U.S. The primary purpose of SOX was to increase investor confidence in the financial reports provided by corporations. To achieve this purpose, the Act established the PCAOB to oversee external auditing and corporate governance issues that potentially affect the reliability of financial reports. Further, SOX increased the responsibilities of corporate managers for producing reliable financial reports and specified restrictions on the activities of external auditors to increase their independence from their audit clients.
Though there are many provisions in the legislation and subsequent regulations, three issues are of primary importance for accounting. These involve the financial reporting responsibilities of the PCAOB, corporations (including their boards of directors and managers), and external auditors.
Responsibilities of the Public Companies Accounting Oversight Board
The PCAOB (www.pcaob.com) reports to the Securities and Exchange Commission
(SEC), which appoints members of the Board. The Board has five full-time members.
The Board establishes auditing standards for external audits of publicly traded companies and oversees the accounting firms that provide these audits. Accounting firms that provide external audits of companies that report to the SEC must register with the PCAOB and report to the PCAOB information about their audit clients, audit fees, and the services provided to clients. As part of its oversight responsibilities