How Does the Sarbanes-Oxley Act, Affect

Running Head: HOW DOES THE SARBANES-OXLEY

How does the Sarbanes-Oxley Act, affect

Non-US Public Companies?

Bhaskar Chowdhury

American Public University

Back in late 2002, I remember reading an article in Houston Business Journal on my flight from Dallas to London, titled ‘Think Sarbanes-Oxley doesn’t apply to private firms? Think again.’ So why does it affect non-public firms when it is for US public organizations? Sarbanes-Oxley is already having a profound impact on corporate governance practice. Although the legislation is aimed at public companies, non-public companies are by no means immune to the need for improved governance and internal control processes. Non-public entities should consider taking a cue from what is happening at public firms and make sure their own practices are sound and reflect a strong focus on financial disclosure and integrity.

The Sarbanes-Oxley Act of 2002, also known as the Public Company Accounting Reform and Investor Protection Act of 2002 and commonly called SOX, is a United States federal law enacted on July 30, 2002 in response to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals, which cost investors billions of dollars when the share prices of the affected companies collapsed, shook public confidence in the nation’s securities market. Named after sponsors Senator Paul Sarbanes (D-MD) and Representative Michael G. Oxley (R-OH), the act was approved by both House and Senate, and signed by President George W. Bush. The Act establishes a new quasi-public agency, the Public Company Accounting Oversight Board (PCAOB), which is charged with overseeing, regulating, inspecting, and disciplining accounting firms in their roles as auditors of public companies. It also covers issues such as auditor independence, corporate governance, internal control assessment, and enhanced financial disclosure....