Sarbanes-Oxley Act (CIMA Professional Handbook)

213 Pages·2005·2.01 MB·English

by  Michael F. Holt

The Sarbanes–Oxley Act
Overview and Implementation Procedures Manual
Michael F. Holt
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First published 2006
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Acknowledgements
The Government of the United States
and the Securities Exchange Commission
for
The Sarbanes–Oxley Act of 2002
The Final Rules
SE Act 10A
The American Institute of Certified Public Accountants
for
The COSO Framework
The various companies offering commercial SOX Solutions
(descriptions taken verbatim from their respective websites)
Mr. Mark Perry of
BOT International Inc.
and
Mr. Mike Barry of
VCom Inc.
Disclaimer
This book is intended as a guide only and contains no guarantee that
following the guidelines contained herein will ensure full compliance
with the requirements of the Sarbanes–Oxley Act.
Readers are responsible for ensuring their own compliance with the
Sarbanes–Oxley Act. It is the reader’s sole responsibility to obtain advice
of competent legal counsel as to the identification and interpretation of any
relevant laws, including but not limited to, the Sarbanes–Oxley Act, that may
affect the reader’s business and any actions the reader may need to take to
comply with such laws. Michael F. Holt and/or the Publishers do not provide
legal, audit or accounting advice or represent or warrant that following the
contents of this book, or using the templates provided in the book or on the
accompanying CD, will ensure that a company is in compliance with any law.
The Author, Michael F. Holt, welcomes comment and analysis regarding this
book and the Sarbanes–Oxley Act and can be contacted as follows:
Box 8486, Victoria, British Columbia, Canada V8W3S1
Tel: [phone] • e-mail: [email protected]
This Page is Intentionally Left Blank
Contents
Background vii
References and Other Useful Materials ix
Quotes from ACL xi
Introduction xiii
1 The Sarbanes–Oxley Act 1
2 The Internal Control System 61
Appendix A—Final Rules 83
Appendix B—SE Act 10A 97
Appendix C—Compliance Review 107
Appendix D—Report and Certification Templates 121
C
o
n
Appendix E—Overview of SOX Commercial Software Solutions 141 te
n
ts
Appendix F—Overview of the BOT International
“Processes on Demand” Software Solution 171
v
Index 193
This Page is Intentionally Left Blank
Background
The Sarbanes–Oxley Act was passed at the One Hundred and
Seventh Congress of the United States of America in January, 2002.
It purports to be an act to “Protect investors by improving the accu-
racy and reliability of corporate disclosures made pursuant to the
securities laws, and for other purposes”.
While this is an American Act, it applies to every corporation listed
on a United States Stock Exchange, or to ANY non-US corporation
that meets the criteria as a Foreign Private Issuer, or to any entity
which solicits funds for investment in the USA (see Chapter 1
“Definitions”). Further, other countries including the UK and
Canada are introducing similar legislation to govern corporations
B
a
operating domestically. In general, Europe seems to favour a “prin- c
k
g
ciples” based system as opposed the US “rules” based approach. ro
u
n
d
It is, therefore, appropriate and probably necessary for most corpo-
rations to comply with Sarbanes–Oxley requirements in order to
vii
avoid future problems with the governing bodies. Non-public com-
panies contemplating an IPO or anticipating an acquisition/merger
situation can also benefit from implementing the system since it
will make them a much more attractive proposition and greatly
reduce compliance difficulties later.
While the costs of implementing an Internal Control System to
meet the SOX requirements can be considerable, it isn’t by any
means money wasted. The improved efficiencies and information
gathering will benefit most companies by providing useful risk
management, employee accountability, performance management
and communications at the very least.
This book summarizes the Act and provides a simplified guide
to compliance. The purpose is to provide management with a rea-
sonably accurate idea of what Sarbanes–Oxley compliance entails.
Detailed procedural manuals and dedicated software packages for
satisfying the requirements of sections 302 and 404 are available
from a variety of sources.
Auditor’s responsibilities and compliance are not included in this
manual in detail.
Full-sized, usable templates are provided in the accompanying
CD with this book, along with a PowerPoint presentation which
explains to employees and Board members the background and
need for an Internal Control system.
It is apparent that it will be a full-time job for at least one individ-
ual and probably several to establish and maintain a system for
compliance, and to keep up with the changes and amendments that
are a feature of this legislation. Since the main thrust of the require-
ments are for financial accountability and control, it will likely fall
on the accounting personnel to perform these functions. However,
the Internal Control System appears to also be required (Section
302) to address any material information that will affect the finan-
cial well-being of the company.
d
n
ou Senior management should be aware of the scope and implications
gr
ck of the Act and the need for compliance as well as having an under-
a
B
standing of what the company is doing to ensure compliance.
viii
References and Other Useful Materials
For the full text of the Sarbanes–Oxley Act, go to:
http://www.thecre.com/fedlaw/topicals.htm
And click on:
Sarbanes–Oxley Act of 2002 (aka Corporate and Auditing
R
e
Accountability, Responsibility, and Transparency Act of 2002) fe
re
n
c
or at e
s a
n
d
http://www.law.uc.edu/CCL/SOact/toc.html O
th
e
r U
SEC Final Rules complete text is at: se
fu
l M
http://www.sec.gov/rules/final/33-8238.htm a
te
ria
ls
Some useful summaries can be found at:
http://www.valuebasedmanagement.net/organizations_sarbanes.html ix
http://www.aicpa.org/info/sarbanes_oxley_summary.htm
http://www.accountancyage.com/News/1131123
A useful “White Paper Proposing Practical, Cost Effective Compliance
Strategies” is found at:
http://www.sec.gov/rules/proposed/s74002/card941503.pdf
The up-to-date Internal Controls Framework document prepared
by COSO can be obtained from the American Institute of Certified
Public Accountants at www.aicpa.org
An on-going website describing changes, questions and answers,
news and current events concerning SOX is available at http://
sarbanes-oxley.com.