The Sarbanes-Oxley Act was passed in response to the numerous corporate scandals that occurred in the early 21st century. Sarbanes-Oxley represents an attempt by the federal government to dictate how companies handle accounting, internal controls, risk management and relationships between corporations and officers. Like other pieces of federal legislation, Sarbanes-Oxley is immensely complex, and you should consult regularly with a knowledgeable attorney to ensure you are complying with all of the law's statutes.
Instructions
1. Monitor the requirements of the Public Company Accounting Oversight Board to ensure your company is in compliance with the audit report standards and rules established by this board. You should hire or appoint someone at your company to serve as a liaison between your company and the board to ensure the appropriate standards are met with respect to your company's audit procedures.
2. Avoid hiring your auditor firm for consulting or other advisory projects outside of its auditing work. Title II of Sarbanes-Oxley prohibits firms conducting audits from simultaneously performing other consulting services for the same client.
3. Create an independent audit committee, comprised of outside directors. This committee will be responsible for hiring the company's auditor and ensuring that the auditor does its job correctly. Note that the directors on the audit committee are forbidden from having any other relationship or receiving any other form of compensation from the company.
4. Regularly brief your company's CEO and CFO on the financial state of the business. Title III of Sarbanes-Oxley requires that a company's CEO and CFO both certify the company's financial reports. Regular briefings of top executives are critical to ensuring this requirement is met.
5. Certify that all off-balance sheet transactions and relationships of the company are fully disclosed in the financial statements, as mandated by Title IV of Sarbanes-Oxley.
6. Include an internal controls report in your company's financial reports. This section should describe the company's risk management practices in great detail and should certify that senior management is continually overseeing the company's risk management practices. Consider hiring a consultant to ensure your risk control processes will meet the standard established by Sarbanes-Oxley.
