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Bill Travis, McGladrey & Pullen managing partner, comments on the Sarbanes-Oxley Act of 2002:
On July 30, 2002, President Bush signed the Sarbanes-Oxley Act of 2002 (Public Company Accounting Reform and Investor Protection Act of 2002) to restore confidence in the U.S. capital markets and, specifically, public company financial reporting. This new law has far reaching impact and may be the most significant reform to the securities laws since they were enacted in 1933. The Act brings significant change in corporate governance, accounting, and, ultimately, the financial markets. While the Act is specific in some areas, it generally provides a framework which will require rule making to fill in the details. The SEC will provide rulemaking and clarification in the coming months until the new Public Company Accounting Oversight Board is operational which is expected to be sometime in the first quarter of 2003. However, even then, we can expect the SEC will play an active role in rulemaking. This Act makes fundamental changes in how audit committees, management, and auditors of public companies carry out their respective responsibilities and interact with each other. It sets forth specific requirements for each of these parties as it relates to corporate responsibilities, auditor regulation and independence, and financial reporting. It also contains provisions for criminal penalties for corporate fraud, some of which became effective when the bill was signed. Needless to say, management, audit committees, and public company auditors must be substantially more diligent in their roles and, in particular, watch out for the best interests of their shareholders. The Act is focused on public companies and contains various timelines for enacting the provisions of the legislation. The legislation raises many questions that won't be answerable until after the SEC's rule making process is completed. Most of the provisions of the Act that impact accounting firms will not go into effect until the Public Oversight Board is constituted by the SEC and the accounting firms become registered. The role of the external auditor and the quality of corporate financial reporting are on everyone's mind. While we are proud of the quality of our audit services, we commit to helping you understand the issues and reinforce your continued trust in our Firm. Legislation and rules and regulations won't result in better audits. The actions of our people, including their commitment to providing our clients with high quality service, integrity and professionalism, will make a difference. - Bill Travis
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