Cascading Effect of Sarbanes-Oxley
Source: Inside Public Accounting, November 2004.
Lenders, sureties, and others believe SOX rules for public companies may be appropriate for private companies according to an AICPA survey. Will the rules become mandatory for private companies? Bob Bunting, chairman of the AICPA, said the issue is urgent. He agrees that it seems inconsistent to limit SOX rules to private companies, but added, “this may be one instance where what is good for General Motors is not necessarily good for the country.”
AICPA Code of Professional Conduct Interpretation 101-3—Performance of Nonattest Services is pertinent to this issue. Revisions to this interpretation became effective December 31, 2003. The revisions, among other things, provide that members who violate the rules of other regulatory bodies such as the SEC, the GAO, state societies, etc., will be considered to be in violation of the AICPA’s nonattest services independence rules. According to the AICPA, this is an amplification of an existing rule; however, some AICPA members may think it is new. Independence is a prerequisite for conducting audits. Some practitioners say this rule makes SOX applicable to private companies, and feel the AICPA doesn’t understand the enormous impact it will have. CPAs are being urged to actively communicate on this subject with the AICPA and other regulatory institutions.
For more, see Inside Public Accounting, November 2004, p. 1 and
www.aicpa.org/download/ethics/interp_revisions_sept03.pdf
www.aicpa.org/members/div/ethics/index/bfc1.htm
www.AICPA.org/download/ethics/AICPA_draft_conceptual_framework_FINAL.pdf