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Essay / Research Paper Abstract
This 3-page paper covers due diligence and due care aspects covered by audit committees. Bibliography lists 4 sources.
Page Count:
3 pages (~225 words per page)
File: AS43_MTduecarau.doc
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Unformatted sample text from the term paper:
Sarbanes-Oxley Act of 2002 mandated several issues as it pertained to auditors and their roles, and also mandated a separate in-house audit committee to ensure honesty and transparency of financial
reporting. As part of their responsibilities, audit committees are required to show due care and due diligence when reviewing financial statements. Due care
and due diligence are frequently interchanged (Due Care). There are, however, some differences between the two. The concept of due care involves "acting
for someone elses benefit or to someone elses specifications" (Colson 2004). Another definition in volves an effort made by one party to avoid harm to another (Due Care). Due care
can also mean "the knowledge and diligence to satisfy the expectations of a reasonable person" (Colson 2004). Due care, from an auditing committees standpoint, means that the committee needs to
have enough knowledge (and skills) to perform engagements and research that is accepted - technical expertise, in other words (Colson 2004). Due care also requires diligence, as well as ensuring
there is enough time and resources dedicated to the activity (in this case, auditing) (Colson 2004). Meanwhile, due diligence refers to a thorough
enough overview and study of a situation to ensure its operating correctly. Due diligence is typically conducted before a major purchase, and it involves a great deal of digging around
in areas such as financial information, reputation of a company, quality and so on. Due diligence can, and should, include background checks of a company as well as asking a
lot of questions about processes, procedures and even who will use an end result (Rosario et al 2005; 69). How do audit committee
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