Relevance Of Sarbanes Oxley Requirements
Sarbanes Oxley requirements specifically state certain procedures that should be in place for Independent auditors, senior management and audit committees. These requirements should be in place for each management factors separately, so as to remove any financial irregularities that have resulted in the past. These requirements have come to asses the goals of corporations not in terms of profit regulation but in terms of financial management which will enable a standardization of accounting practices.
National association of College and University business officers (NACUBO) have given certain recommendations in light of the Sarbanes Oxley Act (2002). Though the act does not cover educational and non-profit institutes, it lists specific requirements that would be essential in order to maintain transparency in financial accounting. In this regard NACUBO has selected Independent auditors, senior management and audit committees that Sarbanes Oxley Act should look into for enhanced financial regulation.
Requirements
Sarbanes Oxley requirements have given certain specifications that Independent auditors, senior management and audit committees should have in place. These requirements can be studied separately according to the separate components respectively- - Independent auditors - A boards audit committee should manage the engagement letter and should take responsibility for looking at audits- compensating and appointing them. - Institutions should not provide non audit services to other institutions that have been prohibited by the act. - Rotation if the lead audit partner should be done every seven years with two years timeout. - Senior Management - Financial officers should adhere to a code of ethics and ensure compliance in their accounting practices. - Questions regarding internal control processes, auditing and accounting should be communicated through a confidential mechanism. - Institutions should abide by section 302 of the act which specifically states the responsibilities of the chief executive officer CEO and the chief financial officer CFO to evaluate any omissions or misstatements about their financial accounting. - Internal controls have to abide according to section 404 which states that businesses should enable transparency in their accounting practices. Institutions should plan their internal controls for a longer period of time. - Audit committees - At least one financial expert should be included in the audit committee. - A charter should be adopted by the audit committee which will ensure authority of language and role. - Audit committee members should be independent in order to ensure credibility in terms of deciding about the accounts without any biased opinion. - External auditors should have direct control over the audit committee. - The board of directors should arrange for a separate audit committee or exercise similar plans to appointing a separate audit committee. These are some of the Sarbanes Oxley requirements which (NACUBO) has recommended so as bringing about complete transparency in financial regulations. Sarbanes Oxley requirements can be incorporated by other institutions, specifically those that are offering higher education. Institutions at the state level have also incorporated some of the Sarbanes Oxley requirements so as to bring about enhanced transparency in their business practices. Implementing the Sarbanes Oxley requirements has been of crucial importance so as to enable higher education institutes an insight into implementing enhanced audit control measures.
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