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Sarbanes-Oxley News & Developments
Private Company Implications of New Public Company RulesWhat initially only seemed to affect public companies is now having implications on corporate America as a whole.
> > In the wake of corporate scandals involving management self-dealing and accounting fraud, President Bush signed into law the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act impacts everything from the role of auditors to public reporting of stock trades by management, from committee independence to reporting of off-balance sheet transactions, and from officer loans to employee whistleblowing.
The Sarbanes-Oxley Act significantly increases penalties for white-collar crimes such as fraud, with maximum jail terms that now exceed the penalties for crimes such as armed robbery, assalt with a deadly weapon and negligent homicide. The Sarbanes-Oxley Act also created several new crimes: retaliation against whistleblowers; destruction of documents and other obstruction of justice offenses; fraudulently influencing company auditors; and a new substantive securities fraud offense.
These new rules and regulations are influencing private companies as well. The Sarbanes-Oxley Act may result in increased scrutiny of a private company being considered for acquisition by a public company. A private company will become subject to the Sarbanes-Oxley Act upon filing a registration statement with the SEC in anticipation of an IPO. The boards of directors and management of many private companies are embracing various aspects of the Sarbanes-Oxley Act as best practices.
Familiarity with these rules will help private companies avoid interference with important future milestones, such as an acquisition or an IPO, and will contribute to the foundation of a company culture of fiscal and corporate responsibility.
Source: Revenue Recognition
Published:2003-09-23
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