h audit committees. Required: a. Describe what an audit committee is. b. Identify the reasons why audit committees hav
Section 301 of the Sarbanes-Oaxley requires that public companies have an audit committee. Independent auditors are increasingly involved with audit committees.
Required:
a. Describe what an audit committee is.
b. Identify the reasons why audit committees have been formed and are currently in operation.
c. Describe the functions of an audit committee.
Compliance of the Sarbanes-Oxley Act (SOX):
• The Sarbanes-Oxley Act (SOX) was passed by the United States Congress in 2002 to protect the interests of investors. This act mandated financial reporting duties for all US public corporations, public accounting firms, and management.
• SOX compliance necessitates the Securities and Exchange Commission (SEC) developing regulations that must be followed by all public firms.
• The purpose of SOX compliance was to modify the accounting and auditing practises of public companies.
• Section-301 creates corporate responsibility for auditing and accounting systems and offers a location for employees to report unethical company behaviour.
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