Final answer:
The claim that audit committee members may receive compensation for consulting or advisory work only with board approval is false. Under the Sarbanes-Oxley Act, audit committee members must not accept any such fees, ensuring their independence and protecting investors.
Step-by-step explanation:
The statement that members of the audit committee may receive compensation for consulting or advisory work only if approved by a majority of the board members under the Sarbanes-Oxley Act is false. The Act imposes strict independence standards on audit committee members of public companies to ensure that auditing processes are conducted without bias or conflict of interest. Specifically, Sarbanes-Oxley requires that audit committee members must not accept any consulting, advisory, or other compensatory fee from the entity or be an affiliated person of the entity or any subsidiary thereof, outside of their board fees.
These regulations were established in response to major accounting scandals, such as those involving companies like Enron, Tyco International, and WorldCom, which highlighted significant shortcomings in corporate governance and the ability to safeguard investors from accounting fraud. By ensuring audit committee members are independent, the Sarbanes-Oxley Act aims to increase confidence in the financial information provided by public corporations.