Sarbanes-Oxley spreads to private sector firms

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by Jill Henry|ret||ret||tab|

SBJ Reporter|ret||ret||tab|

jhenry@sbj.net|ret||ret||tab|

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New and changing regulations are putting more pressure on public and private companies, and the accounting rms that work with them.|ret||ret||tab|

The Sarbanes-Oxley Act of 2002 established new standards for corporate governance in the wake of the nancial scandals of Enron and WorldCom. While most aspects of Sarbanes-Oxley keep publicly held companies in line, some accounting professionals say that it has affected private companies as well. |ret||ret||tab|

Anthony Lynn, a partner with Davis Lynn & Moots PC, said the Sarbanes-Oxley Act has caused a trickle-down effect. |ret||ret||tab|

"When (Sarbanes-Oxley) rst came out, there was a decision to make on whether it affects everybody. If I'm a big rm and doing some of the public sector work, do those rules apply to all my practice or just to the public sector? That was decided pretty quickly. It's just the public sector. But this summer they came out and said that you can apply those professional standards to the rest of your work if you want to. So that's created more quagmire at this point in time because they haven't fully come out with all their standards yet, so there's some confusion in the industry. If I follow, do I follow it piecemeal or do I have to follow it in its entirety? That's just muddied the water that much more," Lynn said.|ret||ret||tab|

Lynn's term on the board of the American Institute of Certied Public Accountants recently ended, but he said that, while on the board, he saw groups that are not publicly held adopt some aspects of Sarbanes-Oxley. |ret||ret||tab|

"There is some push on the national scene from large charities and nonprot organizations that have board members that are employed by a large corporation... and because they're implementing the Sarbanes-Oxley on that side, they have the idea that it's a good idea for the charity to implement the same thing, even though they're not required to," he said. " I'm not seeing any push in this area here as far as southwest Missouri or really even in Kansas City or St. Louis...but I think it's mostly on either one of the coasts and we're seeing a little bit of a ripple of this. Whether it will expand or not, I don't know."|ret||ret||tab|

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Audits|ret||ret||tab|

Dick Williams, associate professor and director of the master of accountancy program at Southwest Missouri State University, said, "For a lot of the larger companies, it's an ongoing thing. It's not something that they can go in and do in a day's time. It takes some time for the auditors to come in and examine the records and that type of thing."|ret||ret||tab|

Auditing has become more time-consuming as a result of Statement of Auditing Standards 99, implemented last year.|ret||ret||tab|

SAS 99 "put more emphasis on detection of fraud. One of the procedures that we have to do now that we've never had to do in the past was actually interview members of management throughout the company or government," Lynn said. Speaking with these individuals can be time consuming, but Lynn said it can be benecial. "You can interview as many as ve or six people and it's just their knowledge of what's going on at the company. You're not just hitting top management. You're hitting a couple of levels of management and people outside of the accounting ofce." |ret||ret||tab|

The questions asked, Lynn said, include: Is there any way the individual thinks fraud could happen? Is the person aware of any instances of fraud that may be going on, and has anything been reported?|ret||ret||tab|

The amount of time devoted to an audit may vary, Lynn said. |ret||ret||tab|

"It's going to be hard to say exactly if it's a set amount of time because it's going to vary on the size of the entity itself. But (Sarbanes-Oxley) lengthened the planning process because as I look at the audit, what I've got to do is go through and make some of these assessments on my own, go out and do interviews and then come back and re-evaluate my assessment with what I found out from the interviews," Lynn said. "It's added several hours to it, but I really can't say it's a set number of hours. The smaller client isn't going to be as long as the larger client."|ret||ret||tab|

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Scrutiny|ret||ret||tab|

Williams said that practices within the industry have become much more visible due to Sarbanes-Oxley. |ret||ret||tab|

"It's certainly under a lot of scrutiny now, more so than in the past. I think the audits will become much more important and will be taken much more seriously by both sides, the auditing rms and the companies getting the audits," Williams said. "And that's not implying that they weren't taken seriously in the past, but I think simply because of the additional scrutiny and everybody's watching now to make sure things are done correctly."|ret||ret||tab|

But the added pressure and responsibilities hasn't hurt the eld in terms of interest. |ret||ret||tab|

Phillip Harsha, director of the school of accountancy at SMSU, said that Sarbanes-Oxley has generated more work for accountants, which, in turn, creates the need for more accountants a positive outcome for SMSU. |ret||ret||tab|

"We're up about 15 to 20 percent compared to last year. ... We were just a little over 500 (accountancy) majors last year and we're pushing close to 600 right now," Harsha said. But Harsha doesn't give Sarbanes-Oxley all of the credit. "I think there's also an emphasis on fraud examination that sounds pretty interesting to people and Sarbanes-Oxley isn't exactly that, but it pushes along in that area."|ret||ret||tab|

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