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Corporate Responsibility

What is corporate responsibility?
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[MUSIC] Since the Securities Act in the 1930s, the Sarbanes-Oxley Act is the most important part of federal legislation that affects accounting business. Beginning in the fall of 2001, the many claims of financial reporting fraud, it’s many major corporations were made. As a result. In the summer of 2002, the Sarbanes-Oxley Act was passed and signed into law having 11 sections. One of the 11 sections of this act is, Corporate Responsibility. According to Sarbanes-Oxley Act, the Audit Committee is directly responsible for the appointments, compensation, and error of the external auditor. This act also specifies that all the members of the audit committee should be independent. Audit committees handle complaints related to accounting, auditing matters and internal controls.
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Even complaints that have been submitted anonymously are included in this procedure. Audit committees have the authority to hold independent counsel with the other advisors when necessary. Every public company should provide information about their funding to the audit committee, and the committee checks if the funding compensates the registered public accounting firm. The Sarbanes-Oxley Act requires that in each annual and quarterly report, the CEO and CFO of each public company should certify that, A, they have reviewed the report. B, the report does not have any material emissions or misstatements. C, the entities financial condition and results of operations are presented in the financial statements and other financial information in the report.
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D, the Internal Control System is properly designed and the effectiveness of the internal control system has been assessed within 90 days of the report. Officers who are signing the report are responsible for this, and they should include their conclusions about the efficiency of internal controls in the report. E, officers should reveal to their auditors and the audit committee, if the design or operation of the entities internal control has any major deficiencies. Officers should also report any fraud related to management or employees who have an important role in the entities internal control structure. F, if any significant changes occurred in internal control before the date of evaluation.
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According to the Sarbanes-Oxley Act, in the audited financial statements, it is unlawful for any officer or director to falsely effect, coerce, manipulate, or mislead the external auditor. Based on this act, CEO and CFO of the any issuer that restates its financial statements should check if the material is non-compliant with SEC financial reporting requirements. These requirements should forfeit any bonus or incentive based or equity-based compensation that is received within one year of reporting the financial statements. The statements are subsequently restated. Profits from the sale of securities must be forfeited for this period of 12 months. Now let’s summarize what we’ve learned. The Sarbanes-Oxley Act is the most important part of federal legislation that affects accounting business.
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One of the 11 sections of this act is corporate responsibility. What an auditing committee does is to maintain actions for handling complaints which are related to accounting, auditing matters, and internal controls. Every public companys should provide information about their funding to an audit committee, who then check if the funding compensates the registered public accounting firm. The CEO and CFO of each public company should certify that their company meets the requirements of Sarbanes-Oxley Act. According to the Sarbanes-Oxley Act, in the audit of financial statements, it is unlawful over any officer or a director to falsely effect, coerce, manipulate, or mislead the external auditor. Now we’ll summarize five key points.
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One, the Sarbanes-Oxley Act is the most important part of federal legislation that affects the accounting business. Two, according to Sarbanes-Oxley Act, the audit committee is directly responsible for the appointments, compensation, and the error of the external auditor. Three, the CEO and CFO of each public company should certify that their company meets the requirements of Sarbanes-Oxley Act. Four, the entities financial condition and results of operations are presented in the financial statements and other financial information in the report. Five, based on this act, CEO and CFO of any issuer that restates its financial statements, should check if materials are non-compliant with SEC financial reporting requirements.

Watch this video from the University of Law Business School to find out what is Corporate Responsibility and the laws behind it.

Use the comments below to reflect on your own domestic legislation or business governance.

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