Oversight Board – 5 members; two CPA’s, three not

• Audit firms must register with Board, pay fees
• Issue standards - audit firms quality controls
• Empowered to inspect registered audit firms; can impose sanctions
• Can refer inspections to SEC, Dept. of Justice, state attorneys general, boards of accountancy, etc.

Audit Committee & Auditors Roles

• Auditor reports to Audit Committee
• Audit Committees preapprove audit and non-audit services
• Audit services prohibited include bookkeeping, IS design & implementation, internal audits, etc.
• Review partner rotated every 5 years
• Accounting firm cannot provide audit services if top official (CEO, CFO, etc.) employed by firm & worked on audit in previous year

Criminal Penalties

• Willfully fail to maintain audit workpapers for five years – felony; penalties up to 10 years
• Destroy documentation in federal or bankruptcy investigation – felony; penalties up to 20 years
• Securities fraud – statute of limitations for discovering fraud extended from 1 to 2 years from date of discovery; extended from 3 to 5 years after act.
• Ban personal loans to executives, etc.

Financial Reporting and Auditing Process

• Thorough 2^nd partner review required
• Management assesses and make representations about effectiveness I/C’s
• Auditor to attest to assessment of I/C’s by management, etc.