Sarbanes-Oxley (or "SOX") is a federal law which places financial reporting and corporate governance requirements on publicly traded companies to protect investors from corporate accounting fraud. Requirements include management of conflicts of interest, independent auditing and accounting, corporate executive responsibility for financial reporting, and related provisions. SOX does not affect private companies such as closely held corporations or LLC's, but even these companies can benefit from following some of the practices SOX mandates:
- Establish financial reporting controls.
- Hire a credible accounting firm and a separate auditor to review company books.
- Implement a Conflict of Interest Policy and have owners and officers sign it.
- Provide protection for whistleblowers.
- Establish a Security Policy that includes both physical and cyber security protocols.
- Implement a Document Retention Plan.
- Be prepared—and able—to disclose to owners substantial changes in the company's financial condition or operations.
- Never alter, destroy, conceal or falsify company records to obstruct a legal investigation.
For more guidance on strengthening your financial reporting and corporate governance practices, consult with your attorney as well as your accountant.
