Company executives in Michigan and Illinois who have worked for private companies but now may be looking to switch employment to a public company or who may work for a company looking to go public will quickly learn that a very different set of oversight is involved for publicly traded companies. There are many advantages for a business to becoming public including the infusion of cash into the business that happens with an initial public offering. But, executive staff must be educated about their responsibilities and understanding Sarbanes Oxley is a good place to start.
As explained by Inc. Magazine, the Sarbanes Oxley Act of 2002 was passed in large part as a response to some highly prominent corporate bankruptcies and fraudulent reporting practices that left many employees and investors with significant financial losses. There are 11 unique elements of the act that cover everything from auditing and accounting practices to criminal penalties for white collar crimes.
According to Forbes, at the time of the passage of SOX, many people feared that the cost of compliance could be more than some companies could bear. This was due in large part to the requirement that businesses hire independent third-party auditors, something that smaller companies may not be able to afford. Over time, some flexibility was shown and exceptions were granted for select entities.
In general, Sarbanes Oxley’s goal was to raise the confidence of investors by increasing transparency through stronger oversight. Provisions like the one that requires company executives to personally sign corporate tax returns were instituted in an effort to reduce fraud.