Frequently Asked Questions

How does the SOX Act influence the operations of a company's audit committee?

The Sarbanes-Oxley (SOX) Act has significantly influenced the operations of a company's audit committee. The Act has introduced new rules that audit committees must adhere to. One of the key changes is the requirement for audit committee members to be independent from the company they are auditing. This means they can have no affiliation with the company other than acting as an independent director. The SOX Act also gives the audit committee full responsibility for the oversight, compensation, and appointment of each auditor. This ensures that the audit process is unbiased and transparent. Furthermore, the Act allows audit committee members to question and interview company auditors without the presence of any corporate leadership. This provision is designed to prevent any undue influence or pressure from the company's management on the audit process. The Act also mandates the audit committee to create guidelines to follow if there are complaints about the audit process. This ensures that any issues or concerns raised about the audit process are addressed promptly and effectively. Additionally, the Act requires the inclusion of at least one financially competent person in the committee, enhancing the committee's ability to understand and scrutinize the company's financial statements.