Sarbanes-Oxley is the name of federal legislation that was passed by Congress in 2002 following accounting scandals at Enron, Tyco, WorldCom, Global Crossing, and others. The legislation set new auditing standards to ensure that public companies issued accurate financial statements and requires the adoption of conflict of interest policies. Board Responsibilities under Sarbanes-Oxley:
Impact on Associations.
The board is responsible for adopting auditing, internal control and ethical standards for the company.
The board must adopt standards for evaluating public accounting firms and must require the firm keep accurate records supporting audit findings for a period of at least seven years.
The board must ensure each audit is approved by a second partner.
The board must develop internal controls in keeping with revised audit standards in order for the public accounting firm to evaluate the company's compliance with said internal controls.
The new laws only apply to public companies, not nonprofit community associations. Even so, the fall-out has affected all audits. Audit requirements regarding documentation have increased, as well as the need to evaluate internal controls, document such evaluation, test internal controls, and then communicate deemed weaknesses of internal controls by auditors to their clients.
: Association boards should work with the association's auditor to adopt and implement internal financial controls
and a conflict of interest policy
: Associations needing legal assistance can contact us
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