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Sarbanes- Oxley Act of 2002 - Coggle Diagram
Sarbanes- Oxley Act of 2002
The impact of SOX on Audit Responsibilities
Key Provisions of Sox Title II: Auditor Independence
Prohibited Services:
BookKeeping
Financial information systems design and implementation
appraisal and valuation Services
Actuarial Services
5.Management functions or human resources services
Internal audit outsouring services
Services as broker, dealer, investment advisor, or investment banker
Legal services
Expert services unrelated to the audit
Tax services are permissible if preapproved by the audit committee
Registered Firms must report to audit committees
The audit firm cannot have employed the issuer's CEO,CFO, controller, chief accounting officer, or any person serving in an equivalent position for a one-year period preceding audit
Key Provisions of Sox Title I: Public Company Accounting Oversight Board (PCAOB)
Should 5 members, two are CPAs and three cannot be CPAs
Duty:
Register public accounting firms that prepare audit reports for issuers
Establish rules relating to the preparation of audit reports for issuers
Conduct inspections, investigations, and disciplinary proceedings concerning registered public accounting firms
如果accounting firm 一年要issue100 audit report的话，每三年PCAOB 要review一次
Registration with PCAOB: Only Registered Firms can audit an SEC Issuer
Each Registered Firm must adhere to the Following Auditing Standards
Audit documentation must be maintained for seven years ( Criminal Penalties will apply)
Provide a concurring or second partner review of each audit report
Describe in audit reports the scope of the testing of the issuer's internal control structure and procedures
Quality Control standards required of Registered Firms
Must monitor professional ethics and independence from issuers
Investigations and Sanctions
结果:
Temporary suspension or permanent revocation of PCAOB Registration
Temporary or permanent suspension or bar of a person from associating with a registered firm
Temporary or permanent limitation on the activities, functions, or operations of a firm or person
Civil Monetary Penalties ---no more than $750,000 and $15,000,000 for registered firms for intentional or knowing conduct, including reckless conduct, the results in violations or repeated instances of negligent conduct.
penalties of no more than $100,000 for individuals and $2,000,000 for registered firm for othe violations
The impact of SOX on Entity Responsibilities
Key Provisions of SOX Title III: Corporate Responsibility
Public Company Committees
Corporate Responsibility for Financial Reports
:
CEO and CFO must sign certain representations regarding annual and quarterly reports including assertion that:
1). They have reviewed the report
2). The report does not contain untrue statements or omit material information
3). Financial statements are fair present in all material respects
4). Assumed responsibility for internal controls including assertion that:
i). internal controls have been designed to ensure that material information has been made available
ii). Internal controls have been evaluated for effectiveness as of a date within 90 days prior to the report
iii). Their report includes their conclusions as to the effectiveness of internal controls based on their evaluation
5). Assert that CEO/CFO made the following disclosures to the issuer's auditor and audit committee
i). All significant deficiencies and material weakness in the design or operation of internal controls which might adversely affect the financial statement
ii). Any fraud regardless that involves management or any other employee with a significant role in the interal controls
Improper Influence on the conduct of Audits
Forfeiture of Certain Bonuses and Profits
: 如果出现restatement， CEO/CFO 要reimburse bonus or gain on sale of securities during that 12- month
Key Provisions of SOX Title IV: Enhanced Financial Disclosures
Disclosures in Periodic Reports
need to disclose all material off-balance sheet transactions:
Operating leases/ Contingent Obligations/ Relationships with unconsolidated subsidiaries
Enhanced conflict of interest provisions
--- Generally prohibited from maing personal loans to directors or executive officers except ordinary of business/ no preferential treatment
Disclosure of Transactions involving management and principal stockholders
--10% 以上就要disclose
Certain exemption
: Investment companies are exempt from certain provision of this act: Periodic report/ enhanced conflict of interest provision/ management assesses of internal controls
Management assessment of internal controls
Code of ethics for senior officers
Disclosure of Audit Committee Financial Expert
Enhanced Review of Periodic Disclosures by issuers
Key Provision of SOX Title VIII: Corporate and Criminal Fraud Accountability
Criminal Penalties for Altering Documents
---- 个人改变损毁记录--no more 20 年/Auditor 没有保留记录-- no more 10 年
Statute of Limitations for Securities Fraud -- 证券欺诈的诉讼时效
--判刑最高25 年
对呀证券欺诈行为， 法律规定的诉讼时效是不晚于以下两者较早的时间点:
自发现构成欺诈行为事实的两年内
自欺诈行为发生的五年内
Whistleblower Protection
Key Provision of SOX Title IX: White-collar Crime Penalty Enhancements
Key Provisions of SOX Title XI: Corporate Fraud Accountability
Independence Requirements of the SEC and PCAOB
Additional Independence Requirements of the PCAOB