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What is Sarbanes-Oxley?

During the financial scandal of the early 2000s, stockholders, creditors and other investors lost billions of dollars. As a result, the U.S. Congress passed the Sarbanes-Oxley Act of 2002. This act, often referred to as Sarbanes Oxley, is one of the most important laws affecting U.S Companies in the recent history. The purpose of Sarbanes-Oxley is to maintain public confidence and trust in the financial reporting of companies.

Sarbanes-Oxley applies only to companies whose stock is traded on public exchanges, referred to as publicly held companies. However, Sarbanes-Oxley highlighted the importance of assessing the financial controls and reporting of all companies. As a result, companies of all sizes have been influenced by Sarbanes-Oxley.

Sarbanes-Oxley emphasizes the importance of effective internal control. Internal control is defined as the procedures and processes used by a company to:

1. ​Safeguard its assets
2. Process information accurately
3. ​Ensure compliance with laws and regulations

​Fontenot & Associates Solutions recommends establishing company policy and procedures to support with maintaining effective internal controls whether you are a private or publicly held business.

Source: CorporateAccounting

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