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Sarbanes-Oxley Act definitions Flashcards

Sarbanes-Oxley Act definitions
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  • Sarbanes-Oxley Act
    Landmark legislation enacted to restore trust in financial reporting by imposing strict reforms on public companies and auditors after major accounting scandals.
  • PCAOB
    Regulatory body established to oversee auditors of public companies, setting standards and conducting inspections to ensure audit quality.
  • Executive Accountability
    Requirement for top corporate officers to personally certify the accuracy of financial statements, with severe penalties for false certification.
  • Auditor Independence
    Principle ensuring auditors remain objective by prohibiting them from providing non-audit services to their audit clients.
  • Non-Audit Services
    Prohibited activities such as consulting or advisory work that auditors cannot perform for their audit clients to avoid conflicts of interest.
  • Work Paper Retention
    Mandate requiring auditors to keep documentation related to audits for seven years, enabling future review and accountability.
  • Auditor Rotation
    Rule requiring the lead audit partner to be replaced every five years to prevent overly familiar relationships with company executives.
  • Conflict of Interest
    Situation where an auditor's objectivity could be compromised, such as auditing a company where former employees now serve as executives.
  • Audit Committee
    Subgroup of a company's board of directors responsible for hiring and overseeing auditors, removing this power from management.
  • Internal Controls
    Processes and procedures within a company designed to safeguard assets and ensure the reliability of financial reporting.
  • Financial Statement Certification
    Formal process where CEOs and CFOs sign off on the accuracy and completeness of financial disclosures.
  • Auditor Oversight
    System of monitoring and regulating auditors to ensure compliance with professional standards and legal requirements.
  • Audit Firm
    Organization providing independent examination of financial statements, subject to strict regulations under SOX.
  • Board of Directors
    Governing body of a corporation, from which the audit committee is formed to oversee financial reporting and auditing.
  • Accounting Scandal
    Event involving falsification or misrepresentation of financial information, prompting regulatory reforms like SOX.