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SOX 301 & OTC Stocks: A Look at SOX for Small Businesses
Section 301 of the Sarbanes-Oxley Act of 2002 addresses the board of directors’ audit committee specifically. According to Section 301, publicly traded companies need to have independent audit committees to manage the external audit relationship, and a “whistleblower” program must be available to employees who identify and need to report instances of impropriety or fraud. For small companies, complying with Section 301 can be challenging. Small companies operate in collegial environments, and boards of directors tend to be comprised of familiar faces. Further, small employee populations make anonymous reporting of impropriety difficult, because it can be easy to determine the identity of the complainant. But small companies can develop a culture of independence that supports the requirements of Section 301. If your company is facing the challenges of SOX Section 301, this paper is a must read. A Google search on “Sarbanes-Oxley” yields 2,010,000 results.1 Clearly, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) has received extensive media coverage. But, that’s where the business community is right now. Sarbanes-Oxley has had a profound impact on the business community. It resulted from a climate of rampant impropriety that characterized the U.S. business community of the late 1990s resulting in the melt-downs of major firms including Enron, WorldCom, and Adelphia, which have become clichés only a few years after they shocked the world, revealing a business community that had become numb to such large-scale fraud. Congress had no alternative but a legislative response to an unacceptable business climate was vital. Sarbanes-Oxley represents the most prominent element of this Congressional response. Not limited to targeted problems in the publicly traded community, Sarbanes-Oxley is broad legislation that covers the wide spectrum of fraudulent activities that contributed to the demise of several world-class companies as well as the bust of the “dotcom bubble”. Consider Enron, for example. Enron’s demise did not result from any one type of fraud committed by a particular type of firm. For example, the downfall did not result specifically from the “special purpose entities” created by Arthur Andersen LLP. The entire financial value chain was corrupted. Investment bankers, traders, auditors, boards of directors, and executive management all played a role in the fraudulent activity that occurred at Enron. Consequently, Congress needed to pass a law that addressed all components of the financial value chain. Sarbanes-Oxley contains many provisions, including the creation of the Public Company Accounting Oversight Board (“PCAOB”)2, audit relationship guidance3, development of an internal controls framework4, and restrictions on the activities of investment bankers and research analysts in the same firm. [continued...] Want to know more? Download the White Paper "SOX 301 & OTC Stocks: A Look at SOX for Small Businesses" for just $49.95. |
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