Audit Committees Post Sarbanes - Oxley

1692 WordsJul 8, 20187 Pages
Audit Committees Post Sarbanes - Oxley The importance of audit committees increased through the years and especially from pre-Sarbanes – Oxley to post-Sarbanes – Oxley. Although, what are the responsibilities of the audit committee members? How does a Chief Audit Executive (CAE) more effectively serve their audit committee members? How do auditors communicate with audit committees? What are the requirements for audit committees? Most of these questions are inherited from what the audit committee’s best practices are. Past research findings conclude that the Securities Exchange Commission (SEC) recommended companies to have audit committees in 1972. Then in 1987 the National Commission on Fraudulent Financial Reporting six…show more content…
They provide assistance with resolving continuous accounting issues and mediate difficulties of opinions between the CAE and the CFO or between the CFO and internal auditors. The Sarbanes-Oxley Act of 2002 significantly increased the authority of audit committees in overseeing their companies’ financial reporting processes. One of the audit committee’s responsibilities is that they oversee the financial reporting process. Audit committees are required to review and discuss the annual audited financial statements with management and the external auditors. They also monitor control processes. Monitoring internal controls directly affects the reliability of financial statements is generally understood to be a function of audit committees. SOX section 301 directed the SEC to require audit committees to establish procedures to handle complaints on accounting, internal accounting controls, or auditing matters and to provide confidentiality to employees who submit complaints. Section 301 also states that audit committees are solely responsible for all the aspects relating to selecting, hiring, and replacing external auditors, whom report to the audit committee. An audit committee approves the compensation to external auditors. It also states that audit committees must discuss and resolve disagreements between management and external auditors. A Chief Audit Executive serves the audit committee to develop the overall quality and stature of internal
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