Question

Under the Sarbanes-Oxley Act, the audit committee of a public company has the following requirement(s):

A. Each member of the committee must be a board member and shall be independent.
B. The audit committee must preapprove all audit and nonaudit services.
C. The audit committee must establish and maintain procedures to handle all issues that relate to accounting, internal control, and auditing.
D. All of the above.

Answer 1

The Sarbanes-Oxley Act requires the audit committee of a public company to consist of independent board members, preapprove all audit and nonaudit services, and establish procedures for accounting-related issues. The correct answer is D. All of the above.

Step-by-step explanation:

The Sarbanes-Oxley Act, enacted in 2002 following major accounting scandals, addresses various aspects of corporate governance and financial practices to protect investors and enhance the reliability of corporate disclosures. Under the Act, there are specific requirements for the audit committee of a public company. These requirements include:

• Independence: Each member of the audit committee must be a member of the board of directors and must be independent.
• Preapproval: The audit committee is responsible for the preapproval of all audit and nonaudit services provided by the auditing firm.
• Procedures for handling issues: The committee must establish and maintain procedures for the receipt, retention, and treatment of complaints received by the company regarding accounting, internal controls, or auditing matters.

Therefore, the correct answer to the student's question is D. All of the above.