A newly released survey of private companies in the United States indicates that although the Sarbanes-Oxley Act is primarily geared towards public companies, 58% of private companies are instituting changes to ensure greater control of their accounting processes.
"Although recent changes to accounting regulations have been directed toward public companies, privately held firms are also closely scrutinizing financial processes in the wake of corporate scandals," said Paul McDonald, executive director of Robert Half Management Resources who sponsored the survey. "Private businesses need to be aware of areas in which vulnerabilities may exist within their organizations."
Of those CFOs who indicated that they are implementing new practices, those changes include:
- 44% Review or change current accounting procedures
- 36% Create or expand internal audit function
- 23% Hire an independent firm for consulting work
- 8% Restructure executive compensation plans
- 2% Some other step
More than a third of the 1,400 CFO's interviewed for the survey indicated they are not taking any steps to ensure greater control of their accounting processes
McDonald recommends that all companies have in place a system of internal checks and balances that integrates core business functions within a strong corporate governance framework. "Conducting an internal audit and developing sound internal controls helps to ensure the accuracy of accounting records and provide early detection of potential errors or fraud."
McDonald added that the Sarbanes-Oxley Act could have a ripple effect on private businesses. "Private firms planning to go public, obtain major financing, enter into long-term agreements with public corporations or be acquired by a public entity will need to address accounting and financial disclosure requirements mandated by the Act."