The Sarbanes-Oxley Act of 2002 was drafted by two congressmen who named it (Sarbanes and Oxley) and was passed into law on July 30, 2002, by US President George Bush. This new law arises as a result of the corporate financial scandals unleashed by the Enron case, Worldcom, and others, which involved million-dollar frauds and, consequently, financial catastrophes, even among investors and companies that had nothing to do with the illicit ones. These corporate crimes caused the collapse of the confidence of the investing public and society as a whole.
In May 2003, the final guidelines of the Sarbanes-Oxley Act (section 404) were published. This new section requires the management of public companies (particularly the CEO and CFO) to implement, document, and determine the effectiveness of applicable internal controls in the preparation of financial information, which is filed with the Securities and Exchange Commission (SEC).
On March 9, 2004, the PCAOB – “Public Company Accounting Oversight Board “1 issued the auditing standards for the review of internal control concerning transparency of information to be published (financial statements of public companies under the control of the SEC). This is auditing standard No. 2 (AS2-PCAOB), which establishes the procedures and guidelines that the auditor must follow to perform a Sarbanes-Oxley compliance audit of the internal control applicable to the preparation of financial information. Its purpose is to ensure that the audit is free of deficiencies or weaknesses that could lead to errors and fraud, or rather, that such deficiencies or weaknesses are disclosed as a result of following such guidelines.
Both the Sarbanes-Oxley compliance and the auditing standards issued by the PCAOB apply to all publicly traded companies in the United States just as entirely possessed auxiliaries and unfamiliar companies that are publicly traded and work together in the United States. SOX additionally manages bookkeeping firms that review companies that must conform to SOX.
Privately owned businesses, good cause, and non-benefits are commonly not needed to agree to all of SOX. Private associations shouldn’t purposely obliterate or distort monetary information, and SOX has language to punish those companies that do. Privately owned businesses that are arranging an Initial Public Offering (IPO) ought to get ready to follow SOX before they open up to the world.
In mid-2007, two important documents were approved to reverse the trend that the pace for SOX section 404 certification is set by the external auditor. From the study of both documents, it is concluded that companies must adapt their strategy to get Sarbanes-Oxley compliance with this part of SOX more efficiently and effectively. Among such purposes, the use of a “top-down” approach, the use of a risk-based approach, and the confidence that the auditor must place in a part of his work, on the review carried out by management, stand out.
The basic role of the SOX compliance audit is the check of the organization’s fiscal summaries. Auditors contrast past explanations with the current year and decide whether everything is copacetic. Auditors can likewise talk with the workforce and confirm that compliance controls are adequate to keep up SOX compliance principles.
Try to refresh your detailing and inside auditing frameworks so you can pull any report the auditor demands rapidly. Check that your Sarbanes-Oxley compliance programming frameworks are right now filling in as expected so there will be no curveballs with those frameworks.