Who's afraid of Sarbanes-Oxley? Accountability legislation creates additional document retention requirements and responsibilities for records managers.

• Author: Tillman, Bob
• Position: Capital edge: legislative & regulatory update

The Sarbanes-Oxley Act of 2002 represents the most meaningful and consequential corporate accountability legislation passed by the federal government since the 1930s. Signed into law July 30, 2002, by President George W. Bush, this Act will change the way corporate America does business.

Sarbanes-Oxley is a sweeping reform aimed at protecting investors by improving the accuracy and reliability of corporate disclosures made pursuant to securities laws. The legislation was in large part a response to the issues of accountability raised by the Enron and Arthur Andersen investigations and Will most directly impact the accounting industry, publicly traded companies, and investment banking firms.

The law creates a new oversight board for accounting firms that audit publicly traded companies. It also addresses auditor independence, corporate responsibility at publicly traded companies, financial disclosures of publicly traded companies, and financial analysts' conflicts of interest. It creates new boundaries between analysts and dealers in investment banking firms and establishes new corporate accountability rules.

Sarbanes-Oxley also creates protections for whistleblowers at publicly traded companies and imposes new criminal penalties relating to fraud, conspiracy, and impeding investigations. It requires organizations to certify the accuracy of their financial statements and instructs them to retain all documents that support those numbers.

How the federal government will enforce the provisions of the Act remains to be seen, but Sarbanes-Oxley already has opened a lot of executive's eyes to the critical importance of records and information management in corporate America. In light of the legislation's profound importance, it is vital to consider how the new rules impact records and information management now and in the future.

Corporate Oversight and Responsibility

The Act creates the Public Company Accounting Oversight Board to oversee the audit of public companies subject to securities laws in order to protect investors' interests and further the public interest in the preparation of "informative, accurate, and independent" audit reports. When it is established, the Board's authority will include

* registering public accounting firms that prepare audits for publicly traded companies

* establishing or adopting auditing, quality control, ethics, independence, or other standards for preparing audit reports

* conducting inspections of registered pubic accounting firms

* conducting investigations and disciplinary proceedings, and imposing sanctions on registered public accounting firms. (The Securities and Exchange Commission, however, can override the Board's sanctions.)

* enforcing compliance with the Sarbanes-Oxley Act, rules of the Board, professional standards, and securities laws

The Public Company Accounting Oversight Board is not yet a viable entity and, according to Frank Moore of Smith, Bucklin and Associates, an association management and professional services firm, it will be at least a few years before everything is in place and the Board begins investigating. When that happens, the Board can impose sanctions for violations--$1,000 for individuals and up to $2 million for corporations, per violation or occurrence.

Accounting firms that prepare or issue any audit report of a publicly traded company are required to register with the Board. The Board is authorized to establish rules governing these registered public accounting firms and to assure that these firms comply with Board rules. Further, each registered public accounting firm must prepare and maintain for a period...