Accountability and Responsibility with the Sarbanes-Oxley Act

The Sarbanes-Oxley Act (SOA) was signed into law in 2002 to address recent corporate misdeeds and accounting scandals. The focus of the so-called “corporate responsibility” legislation is to prop up investor confidence by making Corporate Boards and CEOs more accountable for the accuracy and integrity of the company’s financial statements.

While the legislation focuses mostly on the roles and responsibilities of the Board of Directors and Senior Officers of a company, all employees are affected by SOA. Further, compliance training and education is required in fulfillment of SOA.

Under SOA, the company’s Board of Directors, either directly or through its Audit Committee, is responsible for providing oversight and the proper check and balance for the company’s financial reporting system. Responsibilities include the proper oversight and management of the company’s independent auditors, ensuring that all interested parties (e.g., investors, employees, and customers) have a forum to discuss issues and concerns, and that all financial statements are accurate and reliable. Further, the Board of Directors or its Audit Committee is responsible for adopting and implementing policies and procedures obligating the company and its employees to comply fully with all applicable laws, regulations, and policies. Included in this effort is the establishment of a written “Code of Ethics” that is communicated to all employees and fully enforced by the Board of Directors.

The SOA has a number of training and education requirements. Most generally, all employees must be made aware of the company’s Code of Ethics, how employees can safely (e.g., Whistleblower protection) address or expose any potential violation of the Code of Ethics, and what the employee’s specific responsibility is regarding SOA. Specific employee responsibility differs with employees involved with financial reporting and management most affected. Specific training for these employees typically involves their responsibility related to the internal controls for financial reporting and public disclosures.