Academic journal article Journal of Accountancy

SEC Strengthens Audit Committees

Academic journal article Journal of Accountancy

SEC Strengthens Audit Committees

Article excerpt

In April the SEC adopted as final rules that prohibit the nation's stock exchanges from listing the securities of any public company not in compliance with the audit committee requirements of section 301 of the Sarbanes-Oxley Act of 2002.

Under those provisions each audit committee member must satisfy the independence criteria of section 10A(m) of the Securities and Exchange Act of 1934. In addition the audit committee itself must be directly responsible for appointing, compensating, retaining and overseeing any registered public accounting firm the company engages to perform audit, review or attest services, and the firm must report directly to the audit committee. The rules say the audit committee also should establish procedures for receiving, retaining and addressing complaints--from any party--about matters relating to accounting, internal accounting controls or auditing. Those policies must enable a company's employees to confidentially or anonymously report what they believe are instances of questionable accounting or auditing. Moreover, to ensure audit committees can fulfill their duties, the rules require that they have the authority to engage independent counsel and other advisers when necessary and that public companies provide them with "appropriate" funding.

Additional provisions implement the independence criteria established by section 10A(m). …

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