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December 18, 2005

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Home* The Enron Crisis: The AICPA, The Profession & The Public Interest* Summary of Sarbanes-Oxley Act of 2002

Summary of Sarbanes-Oxley Act of 2002

Section 3: Commission Rules and Enforcement.

A violation of Rules of the Public Company Accounting Oversight Board ("Board") is treated as a violation of the '34 Act, giving rise to the same penalties that may be imposed for violations of that Act.

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Section 101: Establishment; Board Membership.

The Board will have five financially-literate members, appointed for five-year terms. Two of the members must be or have been certified public accountants, and the remaining three must not be and cannot have been CPAs. The Chair may be held by one of the CPA members, provided that he or she has not been engaged as a practicing CPA for five years.

The Board's members will serve on a full-time basis.

No member may, concurrent with service on the Board, "share in any of the profits of, or receive payments from, a public accounting firm," other than "fixed continuing payments," such as retirement payments.

Members of the Board are appointed by the Commission, "after consultation with" the Chairman of the Federal Reserve Board and the Secretary of the Treasury.

Members may be removed by the Commission "for good cause."

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Section 101: Establishment; Duties Of The Board.

Section 103: Auditing, Quality Control, And Independence Standards And Rules.

The Board shall:

(1) register public accounting firms;

(2) establish, or adopt, by rule, "auditing, quality control, ethics, independence, and other standards relating to the preparation of audit reports for issuers;"

(3) conduct inspections of accounting firms;

(4) conduct investigations and disciplinary proceedings, and impose appropriate sanctions;

(5) perform such other duties or functions as necessary or appropriate;

(6) enforce compliance with the Act, the rules of the Board, professional standards, and the securities laws relating to the preparation and issuance of audit reports and the obligations and liabilities of accountants with respect thereto;

(7) set the budget and manage the operations of the Board and the staff of the Board.

Auditing standards. The Board would be required to "cooperate on an on-going basis" with designated professional groups