Sarbanes-Oxley opens doors.

When legislators passed the Sarbanes-Oxley Act of 2002, they claimed its purpose was to refocus public company management on shareholder interests. Whether this objective has been realized continues to be debated. More certain is the far-reaching impact that the Act and subsequent regulations have had on the accounting profession.

As was intended by the legislation, some doors have been closed for auditors of public companies. At the same time, however, doors have opened as opportunities arise for CPAs to provide services needed by both public and private companies. And given their familiarity with the issues that have surfaced for companies, both public and private, CPAs are best suited to provide the needed services.

As Joseph Wolfe pointed out in the AON Risk Management Review supplement to the September 2003 Practicing CPA, public companies must now engage firms other than their outside auditors to provide certain services. The services include financial information systems design and implementation, appraisal or valuation services, internal audit services, and human resource services.

Wolfe also cited the "cascading effect" resulting in new state and federal laws and regulations, such as the revisions to Government Auditing Standards on independence. Although these new restrictions impose additional duties on CPAs and, in some cases, limit their ability to provide certain services to clients, they have also created new professional service opportunities.

Other restrictions--and opportunities--seem to be coming from a "tone" having been set by the regulations. Although private companies are not governed by Sarbanes-Oxley, their directors are feeling the Act's "good-governance influence," says Alan Tompkins who has served on private company boards. Furthermore, aware of the standard set by Sarbanes-Oxley, customers, clients, professional services providers, and business partners of privately held companies want to avoid the spotlight of scandal.

In addition, many private company directors have been alerted to the implications of the recent decision in Pereira v. Cogan, et al. (No. 00 Civ. 619 RWS SDNY, May 27, 2003; U.S. Dist. LEXIS 7818). Judge Robert W. Street's ruling in this case may significantly expand the responsibilities and liabilities of private companies. Sweet ruled that directors at bankrupt Trace International Holdings Inc. failed in their responsibilities by allowing Marshall Cogan, Trace's chairman and controlling...