A6

Question 1

According to the Sarbanes-Oxley Act of 2002, Who does an issuer need to disclose wheter or not they have applied a code of ethics to?

Answer 1

Per Title IV (Enhanced Financial Disclosures) of the Sarbanes-Oxley Act of 2002, issuers must disclose whether they have adopted a code of conduct (ethics) for senior officers (e.g., CEO, CFO, controller, etc.). If a code of conduct has not been adopted, the issuer must disclose the reasons.

Question 2

Under the Sarbanes-Oxley Act of 2002, exactly how many consecutive years may an audit partner lead an audit for an issuer?

Answer 2

Under the Sarbanes-Oxley Act of 2002, the lead audit partner must rotate off an audit of an issuer every five years.

Question 3

What does the SEC says about auditor rotation?

Answer 3

SEC Standards reference both the maximum number of years a lead or concurring partner may perform audit services (5 years) and the maximum number of years other audit partners may perform audit services before audit rotation is required (7 years)

Question 4

What is the requirement before a CPA firm can continue to use the name of a passed founder?

Answer 4

The audit firm may use CPAs in its name because all of the professional auditors are members of the AICPA. Note that only the owners/partners need to be members of the AICPA.

Question 5

When can an auditor give client confidential information?

Answer 5

When the auditor receives a subpoena for a pending lawsuit against HMC, he is allowed under this rule to provide confidential client information, such as audit workpapers, to the legal defense team.

Question 6

List the SOX Compliant rules?

Answer 6

1. Audit committee members are to be members of the issuer’s board of directors but are to be otherwise independent.
2. Public companies are responsible for establishing an audit committee that is directly responsible for the appointment, compensation, and oversight of the work of the public accounting firm employed by that public company (also referred to as an issuer).
3. Audit committees must establish procedures to accept reports of complaints regarding audit, accounting, or internal control issues (whistle-blower hot lines).
4. The CEO and CFO signing the report have assumed responsibility for internal controls
5. Disclosure to all significant deficiencies and material weaknesses in the design or operation of internal controls which might adversely affect the financial statements.
   6.Any fraud (regardless of materiality) that involves management or any other employee with a significant role in internal controls.
6. Issuers must disclose whether the issuer has adopted a code of conduct for senior officers (e.g., CEO, CFO, controller, and chief accountant). If no code of conduct has been adopted, the issuer must disclose the reasons.
7. Auditors of issuers should retain all audit and review workpapers for a period of seven years from the end of the fiscal period in which the audit or review was conducted.
   * Failure to do so will result in a fine, imprisonment for not more than 10 years, or both.