What Your Company Needs To Know About 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’re an American company and haven’t heard of it previously, you have already learned something about the act. It’s an act in the United States.
The Sarbanes Oxley is an act that was signed into US in 2002. It was designed to put a stop to the things that went on it Enron and Worldcom. Both companies announced before bankrupty that they had been surviving on fraud deals for several years. In that year, it wasn’t required for any companies to present their finance records.
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 requires the Chief Executive Officers and the Chief Financial Officers to sign the records. They have to sign the books to gaurentee they are not misrepresented and they match the earnings of the company.
If it turns out the records are incorrect, there are a number of punishments available for the Chief Officers that signed the records.
Like what I said towards the top of the post, you might not be required to abide by the act. You only need to abide by the act if your company is based in either the US, UK or Europe and they have listings on the US stock exchange. You will also have to abide by the act if your company is based in the UK or Europe and it’s a subsidiary of another US company.
The Sarbanes Oxley act can be annoying for some US companies. Because the company is required to report every single business transaction, even the sale and purchase of company assets. 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 do it yourself within the company it can take several months and can often result in errors. The easiest way to ensure you have recorded all your assets is by outsourcing the process to an asset management company.
Unfortunately, it’s definately not a cheap act to abide by. However, many asset management companies do offer services that they can add to your assets to make it easier and cheaper to audit in the future. Many of the companies also offer Sarbanes Oxley compliance software which will make the job even easier for you.
Hopefully you will have learnt what the Sarbanes Oxley act it, whether you need to abide by it, and how you do it if you are required to. No doubt you won’t like the sound of the act, but you can blame Enron.
