This is known as the ‘cooling off period’. If this section were not in place, a threat to independence may be created where member of an audit firm joins an audit client and is able to exert significant influence over the preparation of subsequent financial statements and/or otherwise influences the outcome of the audit. 2-add Audit committee requirements ensure that the committee is independent of the firm, that audit committees establish ‘weightlessness’ mechanisms, and that audit committees are properly funded by the company.
The audit ammonites role is to enhance confidence in the integrity of an organization’s processes and procedures relating to internal control and corporate reporting including financial reporting. The committee provides an ‘independent’ reassurance through its oversight and monitoring role of corporate governance. 2-eye The SCOFF or CEO is required to sign the financial statements prior to their publishing.
This in a way creates a liability for the CEO or SCOFF and makes them liable for any inaccuracy in the financial statements. The likelihood that a SCOFF ho is committing fraudulent financial reporting would sign the certification falsely is much lower than what it had been before Serbians Solely. 2-off Section 401 requires that the SEC issue new pro formal futures, and must study the issues of off-balance-sheet transactions and the use of special- purpose entities. In this way, it relates to the Enron fraud. -egg Management assessment lets the public know that management does have a proper set of internal controls in place while auditor attestation of internal controls gives the public and the intended users of the financial tenements that the internal controls are in place and effective based on the audit firm’s opinion. 2-ah It is important that at least one member of the audit committee be a financial expert so the audit committee properly understands the financial statements and has the ability to detect if there is anything wrong or fraudulent within the financial statements.
Fifth audit committee were to not have a financial expert, the accountants or management might be able to get away with financial statement fraud more easily. 2-ii In the Enron case, many of the financial statements were destroyed. This section now provides a penalty for the destruction of financial statements. 2-AAA Serbians Solely required that audit committees have at least one financial expert in them. Audit committees are responsible for the appointment, compensation, and oversight of the work of the audit firm the company hires.
They were also required to establish ‘weightlessness’ mechanism. 2-bib The audit committee having ownership of the relationship with the external auditor can have both positive and negative implications. On the bright side, management is no longer in charge of picking the external auditor and Hereford should have very little influence on the outcome of the audit. On the negative side, the external auditor may be pressured into following what the audit committee wants them to do since the audit committee is in charge of hiring them. -ICC The responsibility of the Audit Committee is to review all substantive correspondence from external audit about planned audits, audits in progress, and completed audits. The Audit Committee in this case must look at what the external auditor is presenting and determine whether the external auditor has a strong basis for their decision. A good accounting background would be useful in this case, especially when it comes to GAP.