Effectively knowing what Sarbanes-Oxley is and how it affects your contract management process.
What is Sarbanes-Oxley?
The Sarbanes-Oxley Act or SOX was an act that was passed in 2002 by the United States Congress to help protect investors from the likelihood of fraudulent accounting activities that were being done by different corporations. News had spread that corporate officials were filing misleading information about their financial statements and handing them over to their accounting firms after the well-known scandals. The firms that they were handing them over to were firms that they had a tight-knit relationship with and knew they would do them some favors. SOX was implemented to help standardize the accounting and contract management professions and turn bad back into good.
Staying Compliant Under SOX
Staying compliant with the rules and regulations of SOX is the key to keeping your company on the right path. There are many ways organizations, and specifically contract administration professionals, can ensure their compliance under SOX.
The most important thing that is going to help you keep up with these regulations and keep everything in line would be to educate your employees on the basic principles of SOX. If they fail to do so, you are putting them and your company at risk. Once they are educated on the basic principles, it is important not to let it be a one-time learning. Encourage employees to stay up to date and to remind them of all the risks. This is one of this steps that will help you stay compliant under SOX regulations.
Documentation is key. If you fail to document everything you are doing in your financial statements, you are not staying compliant. All CEOs and CFOs are responsible for accuracy and precision of all financial reports. They must report any inadequacies of fraud. While reporting this information, they must side with the financial reports that they are signing off on. This must be done within 90 days of handing off the annual report. Companies that are complying with SOX must release financial reports with up-to-date information for the entire company. This information should include all the transactions and balance sheets. This data will show that there is nothing to hide. If any of this information changes at any point in time, shareholders must be informed immediately. This is important to keep all sides out of the public eye for not staying compliant. Most importantly, companies must not alter, impair or conceal any of the records, contracts or documents that are related in any way to the financial documents. These documents should be kept for at least five years or this could lead to prison time for not staying compliant.
Managing SOX becomes a lot easier when the right tools are in place. When implementing a software to manage SOX, there are two things that you will need to keep in mind. The first thing is that you need to make sure that software systems that you are using are staying complaint with the rules. Even if you are doing your accounting or contract management via a software system, staying complaint is the priority or you could be facing trouble. Leading CLM solutions will offer flexible reporting to support SOX compliance. The second thing to keep in mind is that you must keep all files and records which becomes easier through the right technology. Claiming your computer went corrupt and you lost all your files is not an acceptable excuse. You must have copies of everything to be able to follows all rules and regulations.
Keeping complaint under SOX rules will only help you and your business in the future. Failing to do so will knock down the platform that you have built and you will see all of you demanding work be pulled away from you.