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MASTER MINDS, GUNTUR (WWW.GNTMASTERMINDS.COM)

HIGHLIGHTS OF SARBANES-OXLEY ACT OF 2 0 0 2

Sarbanes-Oxley Act of 2002 is named after i ts authors Senator Paul S Sarbanes

and Congressman Michael G Oxley and has been enacted to improve the

corporate responsibi l i ty among American f irms. Major concerns that were

addressed :

To oversee the audit of public companies which are subject to the securi t ieslaws;

To es tab lish au dit repor t s tand ards an d ru les ; To in sp ect, in vestigate, an d en force com plian ce on t h e par t of regist ered pu blic Accou n tin g firm s, cert ified pu blic accoun tan ts , an d th eir as sociated p erson s.The major provisions of the Act:

Independence of auditors : Amendment to the Securi t ies Exchange Act of 1934

to prohibi t an auditor from performing specif ied non-audit servicess imul taneously wi th an audi t . The non-audi t services tha t a re not express ly

forbidden by this Act can be undertaken only after prior approval by the audit

comm ittee of th e iss u er .

Corporate Responsibility : Confers responsibi l i ty upon audit committees of

public companies for the appointment, compensation, and oversight of any

registered public accounting f irm employed to perform audit services. An audit

comm it tee mem ber ha s to be

Memb er of th e board of directors of th e iss u er ;an d To be in depen den t oth erwise.Enhanced Financial Disclos ures : The financial reports filed with the SEC must

disclose al l material correct ing adjustments that have been identif ied by a

registered public accounting f irm in accordance with SEC rules and general ly

accepted accounting principles (GAAP).

Analyst Conflicts of Interest : I t requires the SEC to adopt rules governing

secu rities a n alysts ' poten tial conflicts of in teres t, in clu ding:

Restr ict ing the prepublicat ion clearance or approval of research reports bypersons ei ther engaged in investment banking act ivi t ies , or not direct ly

respon sible for in vestm ent r esearch ;

Limitin g the s u pervision an d comp ens atory evalua t ion of secu rit ies a n alysts toofficials wh o are n ot engaged in investm en t ba n king act ivities;

Prohibitin g a br oker or d ealer in volved with in vest m en t ba n king a ctivities fromretal iat ing against a securi t ies analyst as a result of an unfavorable research

report that may adversely affect the investment banking relat ionship of the

broker or dealer with th e su bject of th e research report ;

Establ ishing safeguards to assure tha t secur i t ies analys ts are separa tedwithin the investment firm from the review, pressure, or oversight of those

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MASTER MINDS, GUNTUR (WWW.GNTMASTERMINDS.COM)whose involvement in investment banking activities might potentially bias

th eir ju dgmen t or su pervision ;

Directs the SEC to adopt rules requir ing securi t ies analysts andbrok er/ dea lers t o disclose sp ecified con flicts of in teres t.

Commission Resources and Authority : Authorizes appropriations for FY 2003

to th e SEC for:

Add itiona l sta ff comp en sa tion ; En h an ced oversigh t of au ditors a n d au dit services; an d Addit ional professional s taff for fraud prevention, r isk management, market

regu la t ion, an d inves tmen t ma na gement .

Studies and Reports : Man da tes a GAO report to Con gress on:

The factors leading to the consolidat ion of public accounting f irms and thesubsequent reduction in the number of f i rms providing audit services to

bu sin esses s u bjec t to the secur i t ies laws; an d

The impact of such consolidat ion upon the capital formation and securi t iesmarke t s .

Corporate and Criminal Fraud Accountability : Corpora te an d Crim in al Frau d

Accountability Act of 2002 - Amends Federal criminal law to impose criminal

pen alties for:

Knowingly destroying, altering, concealing, or falsifying records with intent toobstru ct or influ ence eith er a Federal investigation or a m atter in ba n kru ptcy; an d

Auditor failure to maintain for a five-year period all audit or review workpa pers p ertaining to an iss u er of secu ri t ies .

White-Collar Crime Penalty Enhancements : White-Collar Crime Penalty

En h an cemen t Act of 200 2 - Amen ds Federal cr im in al law to:

Establish criminal penalt ies for at tempt and conspiracy to commit cr iminalfrau d offens es; an d

In crease crim in al pen alt ies for m ail an d wire frau d.Corporate Fraud Accountability : Corporate Fraud Accountability Act of 2002

Amends Federal cr iminal law to establish a maximum 20-year prison term for

ta m perin g with a record or oth erwise imp eding an official proceeding.