Sarbanes-Oxley Act (SOX) - Mustor Management (MIS 10 000)

Sarbanes-Oxley Act (SOX)

1 Introduction

The Sarbanes-Oxley Act of 2002 is:

	commonly called SOX or SarbOx and.
	often known as the Public Company Accounting Reform and Investor Protection Act of 2002

It is a United States federal law passed in response to a number of major corporate and accounting scandals that resulted in a decline of public trust in accounting and reporting practices, such as those involving:

	Enron
	Tyco International, and
	WorldCom (now MCI).

The legislation is wide ranging and establishes new or enhanced standards for all U.S. :

	public company Boards and Management, and
	public accounting firms.

The Act contains requirements ranging from:

	additional Corporate Board responsibilities to
	criminal penalties
	auditor independence
	corporate governance and
	enhanced financial disclosure.

It requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the new law.

The Act establishes a new quasi-public agency, the Public Company Accounting Oversight Board, which is charged with overseeing, regulating, inspecting, and disciplining accounting firms in their roles as auditors of public companies.

It is considered by many as one of the most significant changes to United States securities laws since the New Deal in the 1930s.

SOX includes requirements for:

a requirement that public companies evaluate and disclose the effectiveness of their internal controls as they relate to financial reporting, and that independent auditors for such companies "attest" (i.e., agree, or qualify) to such disclosure

certification of financial reports by CEOs and CFOs

Auditor independence, including:

outright bans on certain types of work for audit clients and

pre-certification by the company's Audit Committee of all other non-audit work

a requirement that companies listed on stock exchanges have fully independent audit committees that oversee the relationship between the company and its auditor

a ban on most personal loans to any:

executive officer or

director

accelerated reporting of trades by insiders

prohibition on insider trades during pension fund blackout periods

additional disclosure

enhanced criminal and civil penalties for violations of securities law

changes to jail sentences and fines for corporate executives who knowingly and willfully misstate financial statements

employee protections allowing those corporate fraud whistleblowers who file complaints with OSHA within a particular time, to win reinstatement, back pay and benefits, compensatory damages, abatement orders, and reasonable attorney fees and costs.

2 What are the problems and challenges we will face?

Reality one: SOX regulations are written in complex confusing language that most people have difficulty understanding and complying with. This includes your staff, suppliers, contractors, lawyers, translators and consultants.

Reality two: There are unnecessary costs for not complying and ‘ignorance’ is no excuse in the eyes of the law.

Reality three: There is a simple system that will help your people ensure:

	they understand what is required
	they can check that they complied and
	they can check that their suppliers, contractors, lawyers, translators and consultants complied.

This system is called Mustor Management and is governed by the MIS 10 000 standard.

At the 2005 International Plain Legal Language Conference in Washington DC , the conference summary speaker Mr Christopher Balmford, described Mustor Management as “the most exciting development in our field at the moment”.

This system will make it easier for your people to:

	negotiate obligations, offers and counter offers
	identify and compare choices
	compare changed clauses with original ones
	compare clauses between documents
	plan, program and cost compliance
	check and audit compliance
	analyse workflow requirements and develop procedures
	prepare flowcharts, procedures, action plans and programs (timelines, Gantt/PERT charts)
	make and review compensation claims
	complete prescribed notices and
	translate requirements into other languages.

Savvy employers can reduce their risks and increase their staff's productivity, by enrolling their staff in the Mustor Management Masterclass.