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The Sarbanes-Oxley
Act, enacted in July 2002, is a direct result
of the large accounting scandals that had occurred
over the last several years and shaken the very
foundation of public accounting. Its full name
is ‘the Public Company Accounting Reform
and Investor Protection Act’. It is aimed
at bringing out the ‘reforms’ and
is designed to institute stricter financial controls
and reporting, and assure that financial reports
are written in easily understandable language.
Reports must be certified by the CEO, the CFO
and signed off by independent (external) auditors.
It is designed to avoid the rampant irregularities
and surprises that were discovered in immediately
preceding years and to protect the public and
investors.
Although Sarbanes-Oxley is applicable for public
companies with a market capitalization of over
$75 million (U.S.), it is generally expected that
the small companies will not be exempt, specifically
companies with the prospects of eventually going
public. As a result, the Sarbanes-Oxley Act is
going to have far-reaching repercussions for many
companies and its effect will be felt throughout
the organization across many different departments.
Sarbanes-Oxley and IT Sarbanes-Oxley is clearly
intended to address financial reporting and accounting
controls, yet its most significant operational
impact will be in IT. The initial and most obvious
impact will be in the new reporting IT must generate.
Indirect but perhaps more important changes are
the structural changes that are required in IT
business processes.
Sarbanes-Oxley requires comprehensive internal
controls to ensure the accuracy and integrity
of financial reporting. It clearly states that
financial reports must include internal documentation
that addresses the process controls in place and
their effectiveness. IT must not only ensure that
changes to financial reports are made in a controlled
and auditable fashion, but it must also flag for
management changes that will have a "significant
impact" on the business.
Sarbanes- Oxley Law Is An Investment
In Future:
In a recent speech US House Financial Services
Committee Chairman Michael Oxley acknowledged
the Sarbanes – Oxley Act imposes “real
costs” on firms, but called the law "an
investment for the future". He further added
that Sarbanes-Oxley "compliance is an investment
in every company, it is an investment in our financial
system, and is an investment in the strength of
the US capital markets."
"One can not measure the value of knowing
that company books are sounder than they were
before? No more disruptions to entire sectors
of the economy? Or no more overnight bankruptcies
with the employees and retirees left holding the
bag? I think that is valuable return for the investment,
when the outlays now are a small fraction of the
losses that were sustained."
Oxley said company boards are working harder,
audit committees are more active and more independent,
and the number of restatements is up, which he
takes as a sign that problems are being corrected
and bankruptcies are down to record lows.
"Along with all this positive news, we must
remember that just two months ago, earnings smoothing
was confirmed at Fannie Mae, which would result
in a $9 billion plus restatement”, he said.:
That should be sobering news for those who think
that Sarbanes- Oxley is not needed."
PCAOB & SEC Regulatory Expectations: 17 Steps to SOX 302/404 Compliance
Public Companies Find SarbOx
Compliance Expensive
http://www.eweek.com/print_article2/0,2533,a=148356,00.asp
Other references and
news Reports relating to compliance with Sarbanes-Oxley:
Nearly Half May Not Make Second Sarbanes-Oxley Deadline
By John Hazard, eWeek.com, September 27, 2005
How Much Is It Really Costing To Comply With Sarbanes-Oxley?
By Carl Bialik, The Wall Street Journal Online, June 16, 2005
Supreme Court Overturns Arthur Andersen Conviction
By Jess Bravin, The Wall Street Journal Online, May 31, 2005
First Sarbanes-Oxley Prosecution Under Way
By Reuters, CIO Insight, May 19, 2005
E-Mail Regs Still Driving Business
By Barbara Darrow, CRN, May 16, 2005
Corporate Overhauls Are Proving To Be Effective, Greenspan Says
By David Wessel, The Wall Street Journal
Online, May 16, 2005
WAMU must rehire whistle-blowing executive
By Bill Virgin, Seattle Post-Intelligencer
Reporter, May 14, 2005
Deloitte to Be Latest to Settle In Accounting Scandals
By Diya Gullapalli, The Wall Street Journal
Online, April 26, 2005
Thanks to Sarbanes- Oxley, Finance Chief Turnover is Rising
CareerJournal.com, The Wall Street Journal
Online, April 07, 2005 |
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