What is the Sarbanes Oxley Act?
It is the name of a piece of U.S. Compliance legislation which has global implications. It was signed-off in 2002 with a key section 404 coming into effect on November 14th 2004. The act was designed to prevent financial malpractice and accounting scandals which started with the collapse of Enron and WorldCom.
Is it known by any other names?
Yes, the Public Accounting Reform Act and Investor Protection Act.
Should we be looking at this now?
Work on compliance should have started a long time ago, as the process can be long, complicated and expensive.
What does it really mean?
Much of the act is common sense and achievable, the challenge being to ensure that the procedures are observed, and that compliance can be demonstrated, monitored and reported. |
When does it happen?
The key section 404 came into effect on the 15th of November 2004.
What are the penalties of non compliance?
An anonymous US CIO was quoted as saying, “A bad storm is coming, and I don’t know what it is or where it is going to hit”. A great deal of the burden of responsibility falls on information technology, and may companies are now aware of the spectre of compliance hanging over them, with civil penalties being stiff.
Under the Act, as a director of any company listed in the US, you must ensure that adequate and effective internal controls are in place to prevent fraudulent accounting practices. This includes controls to ensure that only authorized personnel can update financial information. Failure to comply with this requirement could mean a 20-year jail sentence. |
