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The Corporate Compliance Package
Now more than ever, public companies are scrambling to makes sense of the issues that confront them in their pressing need to remain compliant with ever-changing compliancelaws. The Sarbanes-Oxley Act of 2002 catapulted to the forefront of the public company mindset the critical nature of addressing compliance head-on; treating it as a focal point of the corporate mission, instead of an afterthought to be accommodated as needed. We have compiled into a handy collection our most pertinent white papers to serve as a solid foundation for understanding the Act and its most salient features. This outstanding value includes the following must-have's: Download the Package "The Corporate Compliance Package" for just $47.00.
Download the Package "The Corporate Compliance Package" for just $47.00. Sarbanes-Oxley Act Included in this three-page white paper are some HIGHLIGHTS OF THE SARBANES-OXLEY ACT OF 2002 which your company may want to take a look at. In response to the burgeoning corporate accounting problems involving listed companies, the United States Congress in late July overwhelmingly approved and President George Bush signed into law, the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act is most notable for imposing increased reporting obligations on issuers and for its substantial federalization of public company accounting practice and standards. The Act also creates or substantially increases criminal penalties for white collar crimes, enhances corporate governance, and imposes federal ethical responsibilities on securities lawyers. Selected provisions of the Act are outlined below. Certain provisions of the Act apply to foreign issuers listed in the United States, irrespective of their jurisdiction of formation – a concept that has caused the European Union to protest the US action. Public Company Accounting Oversight Board The Act creates a five-member Public Company Accounting Oversight Board to oversee audits of public companies. The Board is to have five members, of whom exactly two are to be certified public accountants. The Securities and Exchange Commission, after consultation with the Chairman of the Federal Reserve Board and the Secretary of the Treasury, will appoint its members. Public accounting firms must register with the Board, and the Board will establish and enforce auditing, quality control, and independence standards. The Board itself will be subject to SEC oversight. The Board will be funded by fees on public companies based on their equity market capitalizations, and the Board will also use these fees to fund the Financial Accounting Standards Board, which will continue to establish generally accepted accounting principles. The SEC is to determine, within 270 days after the Act's enactment, that the Board has the capacity to carry out the Act's requirements, and public accounting firms must register with the Board within 180 days after that determination. Auditor Independence A public company may not obtain any non-audit services from its auditor, except with the pre-approval of the audit committee and disclosure in its SEC reports. This requirement will take effect 180 days after the date of commencement of the operations of the Public Company Accounting Oversight Board. In addition, a public accounting firm must rotate the lead audit partner and the audit partner responsible for reviewing the audit of a public company every five years. Additionally, a public accounting firm may not audit an issuer if the issuer's chief executive officer, controller, chief financial officer, chief accounting officer, or equivalent person was employed by the public accounting firm and participated in the audit of the issuer in the past year. [continued...] ^ Back to Top ^ Sarbanes-Oxley: A Brush Stroke With the passage of the Sarbanes-Oxley Act of 2002, the landscape for public companies as well as accounting professionals who perform audits for public companies was forever altered. This five page white paper explores whether their is/was a real need for SOX, discusses the key changes the act brings for accountants, more specifically auditors and the varied reactions of public company management to the legislation. If you're new to this issue, this is a don't miss. If you aren't this is a paper to keep in your briefcase and refer to often! In July 2002, President Bush signed into law the Sarbanes-Oxley Act. Due in large part to unethical actions by large corporations, this historic act created stricter laws for the accounting and auditing professions. With the passage of the Sarbanes-Oxley Act of 2002, the accounting profession changed dramatically. This paper will explore the need for this act, the major changes it brings to the accounting and auditing professions, and reactions of companies to this act. The Sarbanes-Oxley Act did not appear overnight, though to many it would seem that it did. After a succession of corporate scandals was brought to the public’s attention, the government knew they had to step in and control the damage. Although these problems had existed for years, new financial scandals served as a catalyst for bringing them to public light. Seemingly all at once, the scandals of Enron, WorldCom, and Kmart came into public light, and the American public was shocked. The top executives of these companies, as well as the top auditors at their auditing firms were exposed as having committed fraud. Arthur Anderson LLP, previously one of the most powerful auditing firms in the United States, was caught shredding documents and went bankrupt. Problems such as eroding auditor independence, earnings management by big corporations, ineffective audit committees and Board of Directors, and lenient penalties for white-collar criminals were exposed to the public. The public was dismayed and shocked at these scandals, and Congress and President Bush knew they had to restore public confidence in the accounting and auditing professions and capital markets. In a speech, Bush stated, “A key to our economic development is consumer and investor confidence in the markets and in the integrity of Corporate America, and right now that confidence has been shaken.” The Sarbanes-Oxley Act aimed to help reinstill this confidence. In addition to building public confidence, the passage of the Sarbanes-Oxley Act helped insure that these types of scandals will not happen again. The Sarbanes-Oxley Act brought many major changes to the accounting profession, which is defined for the purposes of this paper as accounts employed inside companies, particularly those with responsibility for preparing financial information for public release. One of these changes states that the Chief Executive Officer and Chief Financial Officer of a company must accept responsibility for their published financial statements. The Insurance Coverage Litigation Reporter states that, “the CEO and CFO must make a certification in each periodic report concerning the internal controls of the company…Based on their knowledge, the report contains no false statements or omissions of a material fact.” 2 This statement addresses two separate issues: internal control and the accuracy of the financial statements. Despite being two issues, however, they are dually reported, and the reporting of internal control is a new addition to requirements. Additionally, “The [Sarbanes-Oxley Act] adds significant fines and longer jail time for corporate executives who improperly sign-off on the appropriateness of their financial statements, which are willing and knowing misstatements.”3 Specifically, Section 302: Corporate Responsibility for Financial Reports states that the CEO and CFO of each issuer shall prepare a statement to accompany the audit report to certify the “appropriateness of the financial statements and disclosures contained in the periodic report, and that those financial statements and disclosures fairly present, in all material respects, the operations and financial condition of the issuer.” Another significant change to the accounting profession is the creation of more specific laws and rules defining fraud and the destruction of records. During the corporate scandals previously discussed, the employees of those companies were discovered shredding documents. The Sarbanes-Oxley Act now makes it illegal to destroy or obstruct records. One final significant change to the accounting profession is new protection for corporate whistleblowers. The Sarbanes-Oxley Act provides protection for... [continued...] ^ Back to Top ^ The Sarbanes-Oxley Act: Executive Responsibility In July 2002, President Bush signed the Sarbanes-Oxley Act into law. Due in large part to unethical actions by large corporations and their executives, this historic act created stricter repercussions for professionals within financial professions, and with the passage of the Sarbanes-Oxley Act of 2002 (the “Act”), these professions changed dramatically. It’s been a year plus now and some executives are still in the dark about what it all means for them, their companies and the investing public. This four page white paper is packed with relevant information. It explores the regulatory, liability, and enforcement conditions of the Sarbanes-Oxley Act that will most directly affect public company officers, directors, and counsel experiencing financial troubles or bankruptcy. Don't miss it! Your freedom and pocketbook could be at stake! Three main aspects of the Sarbanes-Oxley Act exist to protect investors, and these elements improve the accuracy and reliability of corporate disclosures:
With the passage of the Sarbanes-Oxley Act, the SEC was granted more authority than it previously had, and it established rules that required the chief executive officer and chief financial officer to certify and approve certain factors of the quarterly and annual financial statements:
[continued...] ^ Back to Top ^ Auditor and Director Independence per the Sarbanes-Oxley Act As a result of increasing accounting and auditing fraud, the SEC has stated that the current supervision of independent accountants is not adequate. The SEC proposed a broad series of rules that are designed to reform oversight and improve the accountability of auditors of publicly traded companies. In January 2003, the Sarbanes-Oxley Act implemented a final rule to Section 407 that require reporting companies to disclose in their annual reports whether there is at least one audit committee financial expert on their audit committee. This four-page white paper explores this rule concerning director and auditor independence. The board of directors for every public company must determine whether or not the company has an “audit committee financial expert” on its audit committee. The company must also disclose that the board of directors has determined that the company has at least one audit committee financial expert serving on its audit committee. The name of the expert must be disclosed, and it should be asserted whether the person is “independent” of management. If the company does not have an audit committee financial expert serving on its audit committee, the reasons for this lack of expert should be disclosed. While the SEC had originally used the term “financial expert” to describe the expert that must be present on the audit committee, this term was changed to “audit committee financial expert.” This change allows the expert’s characteristics to be more relevant to the functions of an audit committee, and it broadened the types of people that may qualify. Pursuant to this rule, an “audit committee financial expert” must have the following attributes:
[continued...] ^ Back to Top ^ Rules, Rules: To Err is Human; to Forgive, Divine -- Not Characteristic of Regulators. Before the lights on the marquee start flickering, companies really need to assess the projected costs to be public and prepare accordingly. Compliance is a beast best fed upfront; hunger pains from non-compliance and making stop-gap regulatory decisions are not only costly but can open the company up to unwanted PR, liability and in some cases litigation. In addition the obvious, comply with SOX, this white paper looks at the trickle down effect of this legislation on private companies preparing to go public. Afterthoughts like data retention and records management appropriate models, information overload v. liability traps v. compliant; certification and internal controls; section 404 mandates; are brought to the forefront. Introduction We all experience that rush of adrenalin right before the opening curtain, the nervous anticipation of the unknown audience that awaits you. For many, understanding the part you are to play, understanding the costs associated with the unfolding drama, only quiets this incredible experience. While it would be natural and easy to succumb to the pressure, you’ve done your homework and now must perform. While somewhat less dramatic, the pressure and expectation of beginning your business dreams and reaching for the ‘go public’ ring are enormous. While this paper can not alleviate the stage fright, it is hoped that through a careful review of these topics and applications that you and your business will have at least taken the time to learn your lines and know the cost of your growing fame. The scope of today’s regulatory environment and reporting necessities has become so competitive, not to mention intimidating, that many private companies seeking to grow or invite more cash into their coffers are reconsidering the costs of such a barrage of compliance and oversight. What was previously seen as an appropriate inconvenience has now emerged into a regulatory bonanza, as the costs of compliance, or non-compliance grow ever steeper with each new headline. Consider the potential effect of Sarbanes-Oxley (SOX) Act and related requirements on your relationships with lenders, insurance companies, government agencies, M&A partners, and private investors. Each of these relationships and opportunities for funding are now expense accounts for your growing internal control risk management process. For many seeking to profit from taking their private secret into the public stage there exists many important hurdles that need careful examination in order to fully integrate current investors, shareholders and employees into the risks associated and the benefits received from the public endeavor. Perhaps the biggest factor exists in the recent overview and scrutiny associated with SOX. While Sarbanes-Oxley was crafted in response to financial scandals and accounting irregularities, it has a potentially far-reaching effect on private companies if they intend to go public or be acquired by a public entity—consequences Congress almost certainly never contemplated. This white paper will seek to explore the risks, understand the tangible and intangible costs, and present options that are necessary before putting the “Yes, we’re open” sign in the front window. A careful examination of important SOX requirements, i.e., Section 404 mandates, internal controls, data retention and record keeping are each placed on stage for your review. Unintended Impact On Private Equity While Sarbanes-Oxley was intended to rectify accounting, disclosure and corporate governance shortcomings of public companies, it has had several unintended consequences for private equity and venture capital firms. Investors and their lawyers have spent enormous time... [continued...] ^ Back to Top ^ Want to know more? Download the Package "The Corporate Compliance Package" for just $47.00. |
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Sarbanes-Oxley Act
