The Sarbanes-Oxley Act of 2002 requires that one or more members of the audit committee be a financial expert and that the financial reports disclose:
a.The name of the Board member(s) serving as financial expert(s).
b.Certification of independence of the financial expert.
c.The existence of financial expert(s) on the audit committee or the reasons why the audit committee does not have a financial expert.
d.Confirmation of the audit opinion by the financial expert.
Choice "c" is correct. In the financial reports, the issuer must disclose the existence of financial expert(s) on the committee or the reasons why the committee does not have a financial expert.
Choice "a" is incorrect. Although the SEC proposed requirements that the name of the financial expert be disclosed, the Sarbanes-Oxley Act only requires that the existence of a financial expert(s) (or lack thereof) be disclosed.
Choice "d" is incorrect. The financial expert is not required to report on the audit opinion.
Choice "b" is incorrect. Although audit committee members are required to be independent and the SEC has proposed disclosure of independence, certification of independence is not required in financial reports under the Act.
According to the Sarbanes-Oxley Act of 2002, which of the following statements is correct regarding an issuer's audit committee financial expert?
a.The audit committee financial expert must be the issuer's audit committee chairperson to enhance internal control.
b.If an issuer does not have an audit committee financial expert, the issuer must disclose the reason why the role is not filled.
c.The issuer's current outside CPA firm's audit partner must be the audit committee financial expert.
d.The issuer must fill the role with an individual who has experience in the issuer's industry.
Choice "b" is correct. Sarbanes-Oxley Section 407 requires that an issuer's audit committee have at least one financial expert, or disclose why that role is not filled. Section 407 requires that the financial expert have an understanding of GAAP and financial statements, be able to assess the application of accounting principles, have comparable experience applying accounting principles to entities that present a similar level of complexity of the issuer, and understand both internal controls and audit committee functions.
Choice "c" is incorrect. The audit committee is charged with negotiating the engagement of the external auditor and supervising their work. The auditor is accountable to the audit committee. The partner in charge of the audit firm engaged to do the audit should not be the financial expert on the audit committee.
Choice "d" is incorrect. Section 407 requires that the audit committee's financial expert understand the application of accounting principles to the issues representative of the complexity of the issuer but does not require specific experience in the industry. Section 407 defines four ways in which the necessary attributes of a financial expert can be achieved: education, experience supervising a financial officer, experience overseeing auditors, or other relevant experience.
Choice "a" is incorrect. Section 407 does not require that the audit committee's chairman be its financial expert.