Carol, a local interior designer, just joined the XYZ Corporation Board of Directors. XYZ Corporation produces cell phones and laptop computers. Carol was very excited about being elected to the Board and planned to work diligently and ethically. The Corporation's attorney gave Carol a welcome packet that included, among other things, a copy of the complete Sarbanes-Oxley Act of 2002. He told her to review the packet and let him know if she had any questions.

Another reason Carol was excited to be part of the Board was that her husband was the Lead Auditor from ABC Corp. ABC Corp was the outside auditing firm that XYZ used. In fact, he had been the Lead Auditor for over 8 years and after the completion of this year's audit, he was hosting a party for all the officers and directors of XYZ the most expensive restaurant in town. (Secretly he was trying to figure how to bill back a portion of the restaurant's bill to XYZ Corporation.)

Carol, as the newest member of the Board was also asked to serve on the Audit Committee of the Board. (This Committee chooses whether to retain the current outside auditing firm.) She was also asked to serve on the Nominations Committee and the Compensation Committee. The Board meets 10 times a year and each Board member is paid $5,000 per meeting. Each Committee meets between 10-15 times per year (many times after the regular Board meeting.) The payment for attending Committee meetings is $2,000 per meeting.

1. Do you see any violations to the Sarbanes-Oxley Act?

2. If so, how could they be resolved?

3. Are there any additional legal issues?

4. Such as any conflicts or possible torts - please analyze.