Sarbanes Oxley Overview

The Sarbanes-Oxley Act was signed into law in 2002, as a result of rampant malfeasance perpetuated within the upper echelons of corporate management. Many corporations prior to the act, routinely published misleading financial reports resulting in tremendous losses for investors. Further compounding the economic losses was the continuous denial of responsibility by the management of the companies, including their outside accounting firms.  The most infamous example would be Enron.

A Sarbanes-Oxley Overview will ensure compliance within the law. For additional assistance please contact a specialist through Capital Investment Advisor.

Mandating stricter accounting practices, and just as importantly, holding management accountable for the accuracy of all information released has lead to renewed confidence among investors in companies regulated within the United States. Ironically, US financial exchanges have witnessed a decline in new offerings compared to the pre Sarbanes-Oxley era. Many companies have elected to issue securities abroad, in countries where regulations are viewed to be more “corporate friendly”.

In light of the prevailing economic and political conditions at the time, various aspects of the act are considered to have been hastily signed into law, without thorough consideration. Consequently some provisions of the law have now or will be debated again at some point in time.  Currently delays in the complete enforcement of the act are dependent upon those provisions facing modification.

Sarbanes-Oxley Overview Considerations:

• Audit Committees
• Section 404
• Section 306
• Corporate Governance

Five employees of HealthSouth Corporation were imprisoned as a result of fraud, while the CEO, James Scrushy was acquitted of 36 counts of signing false filings, in the first major case to be tried since the enactment of the new act. The acquittal came in July of 2005. Mr. Scrushy’s contention implied he was completely unaware that his signature was being affixed to the questionable documents.

Regardless of any anticipated future changes within the act, all companies are still being held liable for damages in civil actions. The Securities and Exchange Commission along with the Justice Department must initiate action, prior to any resulting civil suit on the part of investors. Protect yourself by complying with the act, and avoid any potential lengthy and expensive litigation, or worse, imprisonment.

A Sarbanes-Oxley Overview will ensure compliance within the law. For additional assistance please contact a specialist through Capital Investment Advisor.

Article written by Robert Pino staff writer for Orion Foundry (US), Inc.