If you are a company with connections to the US, you might 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 a United States act.
Sarbanes Oxley is an act that was signed into the US law in 2002. The act was created to stop what happened to Enron and Worldcom happening to other companies. Both of these companies were found to have been running on fraud for many years. At that time, companies didn’t need to report their finance records to the government.
The act simply makes sure that businesses are run correctly, if they are not being run legitimately, the act holds the bosses of the company responsible.
The act requires the Chief Executive Officers and the Chief Financial Officers to sign the records. They have to sign to say that the records don’t contain anything untrue and that the records match the company earnings/losses.
If this is not done or it turns out the records are false, there are some hard punishments that come down on the Chief Officers of the company.
As I said at the top of the post, you might not have to follow 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 would also have to follow the act if your company was a subsidiary of a US company and based in Europe.
Some companies find the Sarbanes Oxley act to be a real pain. 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 best way to make sure you have listed all your assets is by hiring an external company to do the job for you.
Unfortunately, it’s still not a cheap process to do. However, a large number of asset tracking companies will give you different deals to help asset auditing alot 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 most likely won’t like the act, but you can blame it on Enron and Worldcom.
