Intermediate Accounting- Sarbanes-Oxley Act Before the Enron scandal, the CPA profession argues that it could self regulate itself. After the scandal there was no hope or trust. Congress successfully legislated a vote 99-0 in the Senate and 423-2 in the House of Representatives and President Bush signed into law on July 26, 2002. Who it affects groups- -CPAs and CPA auditing firm public companies -Publicly traded companies-employees, stockholders, officers, owners, cpas or cfos or their finance dept. -Attorneys who work for or have as clients publicly traded companies. -brokers, dealers, investment banks who work for these companies. (Board of five members that is subject SEC oversight) PCAOB SEC appoints board-only two are accountants. Registering public accounting firms that prepare audit reports and establishing or adopting auditing, Setting standards, ethics, quality control. The board also investigates and disciplines the public accounting firm and enforces the compliance. Registering is mandatory. Must keep paperwork up to 7yrs after audit with conclusions of that audit. Must fully cooperate with advisory groups and professional acct groups to increase effectiveness. Annual inspections- 100 issuers or more. (once every 3yrs for less than 100.) Investigations- The board may investigate any act, omission or practice by a registered firm or one of their workers or provisions of the act, the board’s rules, profession standards or provisions of the securities laws relating to preparing and issuance of audit reports. Sanction or violations that the board finds may include: Suspension or revocation of a registration Suspension or bar of a person from all firms Limitations on the activities of a firm or person associated with the firm. Min 2million and max of 15 million per violation for the act. (firm) Person can be fined 100,000 for each violation, max 750,000, barring them from industry, or more training. Also imprisonment. Other requirements- Title II of the act prohibit most “consulting” services outside the scope of practice of auditors- -Bookkeeping and related services -design and implementation of financial information systems -appraisal or valuation services -legal and “expert services unrelated to the audit” -appraisal or valuation services Any other service like tax has to be pre-approved from the board. -Fraud liability-if anyone destroyed altered, hid or falsified regards or documents to alter or obstruct investigation.-20 yrs imprisonment -audit partners work for a particular client must be rotated every five years. If not rotated must report to senate committee on banking and the other financial services. -must keep all correspondences, created, sent or received in connection with an audit or review. -Of not to industry members-requirements for corps, their officers, & board members. No lying to an auditor. No insider trading CEOS and CFOS must certify in every annual report that they have reviewed the report and the info is true. Attorney requirements- -must report any violations by the company or agent to the chief council or cfo. -if that person doesn’t do anything they must report the evidence to the board of directors or its audit committee.