Sarbanes-Oxley Act Requirements for Audit Committees

Very Hard Corporate Governance Regulatory Environment

In the wake of substantial corporate scandals, various regulatory bodies worldwide have increased their oversight of corporate governance practices. One notable example is the implementation of the Sarbanes-Oxley Act (SOX) in the United States, which aimed to enhance corporate transparency and accountability.

Under SOX, several provisions were established relating to the responsibilities of management and the role of auditors. However, its influence has also extended internationally, prompting other jurisdictions to adopt similar reforms.

Considering these developments, which of the following accurately describes a key provision that was instituted under SOX concerning the audit committee’s responsibilities?

Audit committees are required to be composed entirely of independent directors and must have at least one member with financial expertise.

Audit committees are permitted to have members that also serve on the management team to ensure greater alignment between executives and auditors.

Audit committees are not mandated to report to the investors directly but must solely report to the company’s board.

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