Does Your Company Have To Comply to The Sarbanes Oxley Act?
Whether you are a US company, or just a company with links back to the US, you may be required to know about the Sarbanes Oxley act. If you are an American company and haven’t heard of it before, then you have already learnt something about it. It’s an act.
The Sarbanes Oxley act is an act that was signed into US law in 2002. It was created to try and prevent the things that went on in companies like Enron and Worldcom. Both companies announced before bankrupty that they had been surviving on fraud deals for several years. At that time, companies didn’t need to report their finance records to the government.
What the act does is it makes sure that companies are run legitinately and if it’s found that they are not, it holds the big guns responsible.
The act forces the Chief Executive Officers and the Chief Financial Officers to sign the books for the business. They must sign the books before handing them over to ensure that the information is true and it represents the earnings of the company.
If the act is not followed or it turns out the records are incorrect, the Chief Officers can be punished severly.
As I said at the top of the post, you might not have to follow the act. Only companyies within the US, UK or Europe and have listings in the US stock exchange are required to follow the act. You should also be required to follow the act if your company is based in Europe and it;s a subsidiary of a US company.
Some companies find the Sarbanes Oxley act to be a real pain. Because the company needs to report every transaction that has taken place, even asset sales and purchases. This is where people have the problem because all the company’s fixed assets must before recorded.
The process of fixed asset accounting can be expensive and take time. If you try and do it yourself, it can take several months based on the size of your company. The most efficient way to get a complete audit of your assets is by hiring an external asset management company to do the job.
Unfortunately, it can still be expensive to do. However, the majority of asset management companies will offer you different features to make asset auditing simpler in the future. Many of the companies also offer Sarbanes Oxley compliance software which will make the job even easier for you.
Hopefully that helped you understand what the Sarbanes Oxley act is and what you have to do to abide by it. You probably won’t like having to do it, but you can blame Enron and Worldcom.
