Reform measures achieve fruition.
Certain provisions of the Sarbanes-Oxley Act See SOX. became required practice in January when the SEC released as final four rules governing various aspects of accounting, financial reporting and auditing. As mandated by the act, the commission's new rules address auditor independence, off-balance-sheet arrangements, audit records retention and pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts.
The phrase pro forma financial reporting--all focal points focal point
See focus. of Congress's efforts to stem the recent tide of corporate failures.
The auditor independence rule supersedes earlier provisions governing nonaudit services (www.see.gov/rules/final/33-8183.htm). It forbids auditors to provide nonaudit services such as financial information systems design and implementation, appraisal and valuation, actuarial ac·tu·ar·y
n. pl. ac·tu·ar·ies
A statistician who computes insurance risks and premiums.
[Latin functions and internal audit outsourcing to their audit clients unless it is reasonable to conclude the firm will not examine the results of such work when it audits the client's financial statements. The rule also requires firms to choose between keeping their clients' books and auditing them. Other provisions prevent auditors from performing for audit clients any management or human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. services; broker-dealer, investment advisory or investment banking services; or legal or expert services unrelated to the audit.
Particular aspects of the rule pertain to pertain to
verb relate to, concern, refer to, regard, be part of, belong to, apply to, bear on, befit, be relevant to, be appropriate to, appertain to audit committee preapproval of both audit and nonaudit services before the auditor renders them; disclosure to investors of the nonaudit services the auditor provides, as well as the fees paid for all services; audit partner rotation and compensation; the definition of the term audit partner; how long an auditor must wait before overseeing financial reporting at a public company he or she had audited; communication between the auditor and the audit committee; and the impact on foreign accounting firms or companies. The rule will take effect May 6.
Another rule requires corporations to explain any off-balance-sheet arrangements in a clearly identifiable section of their "management discussion and analysis" disclosure documents and their aggregate contractual obligations in a summary table (www.sec.gov/rules/final/33-8182.htm). According to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. the SEC's definition, off-balance-sheet arrangements include certain guarantee contracts, retained or contingent interests in assets transferred to an unconsolidated entity, derivative instruments Derivative instruments
Contracts such as options and futures whose price is derived from the price of an underlying financial asset. classified as equity or material variable interests in unconsolidated entities that conduct specified activities. The rule's disclosure requirements for off-balance-sheet arrangements and contractual obligations are effective for fiscal years ending on or after June 15 and December 15, respectively.
The SEC also issued a rule specifying that accounting firms must retain for seven years workpapers documenting audits they perform (www.see.gov/rules/final/33-8180.htm). Auditors must comply with the rule's provisions no later than October 31.
And in another rule, the commission adopted regulation G, which will apply whenever a company publicly discloses material information that includes a non-GAAP-compliant financial measure--commonly known as a pro forma release (www.see.gov/rules/final/33-8178.htm). In such situations, the rule requires public companies to include with the non-GAAP material the most directly comparable GAAP GAAP
See: Generally Accepted Accounting Principles
See generally accepted accounting principles (GAAP). financial measure and to "reconcile" them. The regulation takes effect March 28.