Welcome to the presentation of

Neophyte

Group no:7
presenting

Sarbanes-Oxley Act

Group
List.
19-182
19-172
Adeeba
19-174
19-179
19-180
Juma
19-255
Rahman

Rabbi - Al - Sifat
K. Maksuda Hoque
Md. Noman Sarkar
Nazmul Hauque
Syeda Fatema - Tuj Md. Hammadur

A brief
History
Objective improving the financial
reporting quality , corporate
governance & increasing the
responsibility of publically traded
company to protect the interest of
investors
Sox was enacted 30th June 2002 .

Nutshell
Reforming Auditing & Accounting
procedure
Oversights responsibility of
Directors
Regulating conflict of interest and
insider treading of directors and
officers
Conflict of interest of stock
analyst
Disclosure requirement for
anything that may influence
companys financial health
Criminalizing inappropriate
conduct regarding document
handling , disclosure &
interference with investigation

Emphasizes facts related to

groups
Inde
pen
den
t
Aud
itor
s

Man
age
men
t

Audi
t
com
mitt
ees

Responsibilities lie on these parties

Independent Auditor

People or group of people assigned with audit responsibility

Instructions related to
Auditors

What to do and what not to do?

Institutions should prohibit their
independent auditors from providing nonaudit services
The lead audit partner should be rotated
every seven years.

Source:
NACUBO report

Senior Management

Group of people entrusted with managerial responsibility

Instructions For Senior

Mgt.

What to do and what not to do?

Should adopt a internal code of ethics
confidential complaint mechanism should be made
available to employees to communicate concerns
about accounting, auditing, or internal control
processes.

Whistle
Blowing

Should encourage

Instructions for senior

mgt.

What to do and what not to do?

Section 302 requires the chief executive officer
(CEO) and the chief financial officer (CFO) to assert
that

the financial statements have

no material misstatements or
omissions and that they have
evaluated disclosure controls
and procedures.
Sec:

302

Instructions for senior

mgt.

What to do and what not to do?

Internal control act on following categories:
Effectiveness and efficiency of operations
Reliability of financial reporting
Compliance with applicable laws and regulations
Safeguarding of assets

document and evaluate

internal controls over a planned
time period. .

Sec:
404

Audit Committee

operating committee of a company's board of directors

that is in charge of overseeing financial reporting and disclosure

Instructions related to
audit Committee

What to do and what not to do?

The board of directors should have an audit
committee or its equivalent.
The audit committee should exercise direct
control over the external auditors.
Members of the audit committee must be
independent, and management should not be
voting members of the audit committee.

Instructions related to
Audit committee

What to do and what not to do?

The audit committee should have a charter that
includes role and authority language.
At least one financial expert should be included
on the audit committee.

Interpretation of SOX
section wise

Now we going to dig deeper into this act:

The act is divided into 11 titles

And here our section wise exploration journey begins

Title-i

Creation of

PCAOB

(the Board)

Public Company Accounting Oversight

Board

Overview
Created as a non-profit
organization, the 5 member
Board oversees audits of
public companies; it is under
the authority of the SEC

what they
cactually do???
Well we are going to define
that

Duties of PCAOB

o
o
o
o

Write audit standards

Register public CPA firms to do audits
Set Quality Control standards for audits
Do peer reviews of CPA firms at least every
three years

Well Duties are not finished yet

Additional Duties

o Investigate and discipline

o Set Continuing Professional Education
requirements for auditors
o Review company disclosures and financial
statements at least every three years

End of Title Is explanation

It ranges from
section 201-209.

Lts have a look over them!

Auditors cant do! :

What is said in

Section 201?

Bookkeeping
Systems design
Valuation services
Actuarial services
Internal audit
Management functions

Title - ii

Section
202
Section
203

The audit committee must

preapprove all services
provided by the auditor.

The lead (or coordinating)

audit partner and the
reviewing audit partner of the
public accounting firm must
rotate off the audit every
seven years.

Title - ii

Section
204

The public accounting firm must

report to the audit committee:
All critical accounting policies and
practices used by the client
All alternative treatments of
financial information and the
treatment preferred by the public
accounting firm
Other material written
communication between the public
accounting firm and management

Title - ii

Section
205

Report on conforming
amendments to the SEC Act

Section
206

Cant do audit if CEO, CFO

from their firm, 1 year wait
period

Section
207

The GAO will do a study on

the potential effects of
mandatory rotation of public
accounting firms.

Title - iii
Ranges from

Section 301- 308

Focuses on

CORPORATE
RESPONSIBIL
ITY

SUMMERY OF TITLE iii

Establishes minimum

independence standards for

audit committees
Establishes procedures for

addressing complaints by
the issuer regarding
accounting, internal control,
etc. (this lays the
foundation for anonymous
whistleblowing)

TITLE iii Continued

CEOs and CFOs must certify in

any periodic report the

truthfulness and accurateness of
that report
Under certain conditions of re-

statement of financials due to

material non-compliance, CEOs
and CFOs will be required to
forfeit certain bonuses and
profits paid to them as a result of
material mis-information

Title - iv

Enhanced Financial
Disclosures
Ranges from sec 401-409

Due to enhanced Disclosures Now we do have

CLOSER LOOK!!!!!

1. off-balance-sheet transactions
2. pro-forma figures and stock transactions of
corporate officers
3. assuring the accuracy of financial reports and
disclosures
4. timely reporting of material changes in
financial condition and specific enhanced reviews
by the SEC or its agents of corporate reports.

Required Disclosures !

OTHER TITLES

Title

V-Xi

Summery
A short overview

OTHER TITLE
OVERVIEW

Analyst conflicts of interest (title

v)
includes measures designed to help restore
investor confidence in the reporting of securities
analysts. It defines the codes of conduct for
securities analysts and requires disclosure of
knowable conflicts of interest

Commission Resources and

Authority (title vi)
defines the SEC's authority to censure or bar
securities professionals from practice and defines
conditions under which a person can be barred from
practicing as a broker, advisor, or dealer

OTHER TITLE
OVERVIEW

Studies and reports (title vii)

SEC to perform various studies including the
effects of consolidation of public accounting
firms, the role of credit rating agencies in the
operation of securities markets, securities
violations, and enforcement actions

Corporate and Criminal Fraud

Accountability (title vii)
describes specific criminal penalties for manipulation,
destruction or alteration of financial records or other
interference with investigations, while providing
certain protections for whistle-blowers

OTHER TITLE
OVERVIEW

White Collar Crime Penalty

Enhancement
(title ix)
This section advances criminal penalties for
fraudulent
acts

Corporate Tax returns (title x)

states that theChief Executive Officershould sign the
company tax return

OTHER TITLE
OVERVIEW

Analyst conflicts of
interest (title xi)
Sec 1001-1004
Discusses fines, consequences, and sentencing
for noncompliance
Sec1005
Gives the SEC the authority to prohibit anyone
convicted of securities fraud from being an
officer or director of any publicly traded
company