The Sarbanes Oxley act is an act that was signed into US law in 2002. It was created to try and prevent the things that went on in companies like Enron and Worldcom. Both of these companies were found to have been working using fraud deals for a number of years. At that current time, the companies weren’t required to show their records to the US 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 means that Chief Executive Officers and Chief Financial Officers are required to sign the records for the business. They must sign the books before handing them over to ensure that the information is true and it represents the earnings of the company.
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.
Like I said at the top, you might not be required to follow the act. You are only required to abide by the law if your company is based in the US, UK or Europe and it has listings in the United States stock exchange. You would also have to abide by the act if the company is based in the UK or Europe by it’s a subsidiary of an US company.
The act can be very annoying for some companies. Because the company needs to report every transaction that has taken place, even asset sales and purchases. 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 attempt to do the job yourself, based on the size of your company, it can take a number of months and just cause more problems. The most efficient way to get a complete audit of your assets is by hiring an external asset management company to do the job.
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 softwarewhich will make the job even easier for you.
Hopefully you will now know what the Sarbanes Oxley act is and how you have to abide by it. You probably won’t like having to do it, but you can blame Enron and Worldcom.
