Sarbanes Oxley Act Summary

Sarbanes – Oxley Act is a legislation passed by the US Congress to protect shareholders and general public from accounting errors. This act was enacted in 2002 by two Congressmen; Paul Sarbanes and Michael Oxley to protect investors from corporate fraud. An audit committee is an operating committee formed by board of directors and other members that is in charge of overseeing the financial reporting and disclosure. The SOX prohibits SEC from listing of any security for a US publicly traded company without an audit committee. These are the requirements for audit committees under the 2002 Sarbanes-Oxley Act;
The SOX requires all members of the audit committee to be independent directors and should include one member who is a financial expert.
These are procedures the independent auditor follows when evaluating financial statements such testing the issuer’s internal control, and materiality. At the end of the audit, the CPA firm provides a detailed audit report on their findings of the issuing company to the audit committee.
It is the responsibility of the audit committee to ensure the funding of the independent auditor and any outside advisors. The audit committee selects the public accounting firm to conduct the audit of the issuing company and a contract agreement is signed. Therefore is it is in charge of paying the independent auditor’s full amount once the audit is complete.
Conclusively, 2002 Sarbanes-Oxley Act created a liaison between management and the independent auditor by requiring companies to have audit committees. This prohibits direct communications between the management and the auditors so that auditors can do their job without being influenced by management. Hence curbing high fraudulent accounting activities left unnoticed in accounting corporations by like those of Enron, Xerox and Arthur