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Sarbanes-Oxley Act Defined
The Public Company Accounting Reform and Investor Protection Act of 2002 (the Sarbanes-Oxley Act) is the most extensive reform to the U.S. financial markets since the enactment of the Securities Act and the Securities Exchange Act in the 1930s. The act followed the high profile scandals like Enron and was named after Senator Paul Sarbanes and Representative Michael Oxley, the main proponents of the bill.
President Bush described the Sarbanes-Oxley Act as intended to "deter and punish corporate and accounting fraud and corruption, ensure justice for wrongdoers, and protect the interests of workers and shareholders.”1
The Sarbanes-Oxley Act was signed into law in July 2002. It introduced highly significant legislative changes to financial accounting practices and corporate governance rules and regulations. A primary objective was to protect stockholders in public corporations by improving the reliability and accuracy of company securities law disclosures.
Tough-to-meet deadlines were also mandated. Most companies will be required to meet the mandates for financial reporting and certification for any end-of-year financial statements filed after November 15, 2004 (amended from June 15th). Smaller companies must meet these mandates for statements filed after July 15, 2005 .
Section 404 of the act outlines specific requirements for public companies. Planning for Section 404 should start as soon as possible to provide ample time for the critical assessment, and to identify areas where corrective action is needed. Companies are finding that Section 404 compliance is taking longer than anticipated. In fact the scope of the requirements has widened since Sarbanes-Oxley first passed, and guidelines for auditors, which were issued in March of 2004, are more demanding than expected.
This has caused a need for knowledgeable specialists. “There is a real shortage of resources (CPAs) who really understand how to do this work,” says Lynn Edelson, a partner of Pricewaterhouse Coopers.2
“Companies are incurring additional time and resources to resolving unanticipated deficiencies,” notes A. Stone, in Hardly Ready for Sarbanes-Oxley, Businessweek.com. “…many companies likely will be forced to admit to deficiencies in their internal controls – mainly because they don’t have time to fix all the problems that are cropping up before the end of their fiscal years.”3
Compliance goes beyond finance departments and impacting operations. It affects the entire management philosophy. “Management must establish a code of conduct and ethical behavior that absolutely permeates the entire organization,” states T. di Stephano, in his article Sarbanes-Oxley: Avoiding Its Pitfalls.4
As a result, many companies are turning to outside experts to address time and resource constraints. A recent survey showed that many companies still have significant ground to cover. The amount of resources needed is putting a strain on many companies’ internal resources.5 Soren McAdam Christenson LLP. is positioned to help Southern California companies over these formidable hurdles.
Soren McAdams Christenson LLP, a leading firm in the Inland Empire , is located in Redlands . With ten partners and dozens of professional staff, they serve start-ups to hundred-million-dollar companies in the Inland Empire and throughout the western U.S. For more information go to their website: http://www.smc-cpas.com.
http://www.sarbanes-oxley-forum.com/
Lynn Edelson, a partner at accounting firm Pricewaterhouse Coopers Source: Stone,A. (2004, Sept. 20) Hardly Ready for Sarbanes-Oxley. Businessweek.com [Online].
Source: Stone,A. (2004, Sept. 20) Hardly Ready for Sarbanes-Oxley. Businessweek.com [Online].
Ecommercetimes.com [Online]. (2004, Sept. 17)
Sullivan, O. (2004, June 23) 92% of Internal Auditors Polled Find Gaps in Their Own Company’s Internal Controls. Smartpros.com [Online].
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