The audit committee receives wide leverage in overseeing the top management's accounting decisions. One direct effect of the Sarbanes-Oxley Act on corporate governance was the strengthening of public companies' audit committees. To increase transparency, the act enhanced disclosure requirements, such as disclosing material off-balance sheet arrangements.To deter fraud and misappropriation of corporate assets, the act imposes harsher penalties for violators. ![]() The act implemented new rules for corporations, such as setting new auditor standards to reduce conflicts of interest and transferring responsibility for the complete and accurate handling of financial reports.The Sarbanes-Oxley Act of 2002 was passed by Congress in response to widespread corporate fraud and failures.
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