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[S91]Sarbanes Oxley And It

by Ramesh Rajania, Ram

For most, the section 404 solution will serve as a central repository for internal control documentation. It will also facilitate the testing of internal and external audit controls and serve as a portal for executive review. Like most rollouts, Section 404 software requires education in processes and internal controls.

Most products offered by vendors are web-enabled, allowing clients with multiple locations to use software with a minimum of IT Staff. The use of Extensible Markup Language (XML), Extensible Business Reporting Language (XBRL), Java, and middleware languages is a success factor. These languages particularly XBRL, bring the publication, exchange, analysis of the complex financial information in corporate business reports into interactive realm of the internet.

XBRL provides a common platform for critical business reporting processes and improves the reliability and ease of communicating financial data among users, whether internal or external to the reporting enterprise. XBRL is an XML based royalty free open standard that is being developed by a consortium of more than 170 companies and agencies; the intent is to deliver benefits to investors, accountants, regulators, executives, business and financial analysts, and information providers.

Commercial packages typically include word-processing, spreadsheet, diagramming and flowchart tools to document processes and internal controls. These features allow users to custom-design their software. Some Solutions facilitate certification testing of controls by the business owner and the auditor. Others allow a view of best practices for internal controls or the committee of Sponsoring Organizations (COSO) integrated framework.

Various packages offer users the ability to resolve significant accounts from financial statements. Processes associated with selected accounts are identified and then assigned to process owners. Internal controls are documented and tested, and process owners can sign certifications for each process on a quarterly basis.

When the Enron and MCI scandals broke, it became clear to the US government as well as everyone else that something needed to be done to prevent financial abuses from harming the public. A bipartisan team of legislators led by Senator Paul Sarbanes and Representative Michael G. Oxley put together the Sarbanes Oxley Act, also titled the Public Company Accounting Reform and Investor Protection Act of 2002, and more manageably called SOX for short. It was overwhelmingly passed by the House of Representatives, and the Senate voted unanimously to pass the Sarbanes Oxley bill.

The Sarbanes Oxley Act was signed into federal law on July 30, 2002. Its primary purpose is to protect investors by making corporate information released about accounting and finance more accurate and reliable. It addresses issues like the establishment of a public company, creation of an accounting oversight board, auditor independence, corporate responsibility, and enhanced financial disclosure.

According to President Bush, Sarbanes Oxley includes "the most far-reaching reforms of American business practices since the time of Franklin Delano Roosevelt."

That may be true, but it's also one of the most complex and difficult to understand reforms ever passed. It covers topics such as:

* Personal loans by the company to executive officers or directors
* Financial report certification
* More timely insider trading reporting
* Strong limitations on insider trades
* Public reporting of top executive real compensation and company profits
* Auditing independence
* Personal accountability by the chief officers of the company, backed up by criminal and civil penalties including serious jail time and financial penalties on individuals who misstate financial statements and commit securities violations

You can see how a bill covering so many different topics might be seen as discouragingly complex

Understanding Sarbanes Oxley

There are a few things you can do to learn how Sarbanes Oxley works. First, read reviews and synopses of the Sarbanes Oxley Act on the SEC website; they give an excellent overview of what the law is about. Second, you can get training focused in several different ways on the part of Sarbanes Oxley you need to understand.

The main thing to understand about Sarbanes Oxley, though, is that it primarily affects how you do your accounting, and thus how you run your IT services. Electronic controls must properly manage your financial information, so that you have clear, easy-to-access real-time information on your company's finances. Corporate finances must be kept separate from executive finances, payroll, and other moneys. Auditing for accountability is crucial, so that if errors or misinformation enter the data stream you will be able to determine the source.

With Sarbanes Oxley, even if you were ignorant of what was going on in your accounting, if you are a major executive you will be both civilly and criminally liable for any errors released to the public, or the failure to release certain information in a timely manner. You must learn about Sarbanes Oxley, not just to comply with more government regulations, but to protect your personal life.

Article Source : Pg. 8

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Both Ramesh Rajania & Earl Powers are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Ramesh Rajania has sinced written about articles on various topics from VOIP. Ramesh rajan is the lead writer for the popular . Ramesh Rajania's top article generates over 590 views. to your Favourites.

Earl Powers has sinced written about articles on various topics from Legal Matters, Lemon Law and Motorola Cell Phone. Earl Powers, US Lawyer and expert - focusing on . Earl Powers's top article generates over 18100 views. to your Favourites.