Sarbanes Oxley

On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002. The Act which applies in general to publicly held companies and their audit firms-dramatically affects the accounting profession and impacts not just the largest accounting firms, but any CPA actively working as an auditor of, or for, a publicly traded company. Essentially, the Act creates a five-member Public Company Accounting Oversight Board (PCAOB), which has the authority to set and enforce auditing, attestation, quality control and ethics (including independence) standards for auditors of public companies.

The Act also is empowered to inspect the auditing operations of public accounting firms that audit public companies as well as impose disciplinary and remedial sanctions for violations of the board's rules, securities laws and professional auditing and accounting standards. Other provisions affecting the profession include requiring the rotation of the lead audit partner and reviewing audit partner every five years, and extending the statute of limitations for the discovery of fraud to two years from the date of discovery and five years after the act (previously one year and three, respectively).