11 Important Key Points From Each Title Of Sarbanes-Oxley Act

 The Sarbanes-Oxley Act of 2002 was passed by the United States Congress as a way to protect investors from the risks of fraudulent accounting conducted by corporations. This act put strict reforms into place to improve financial disclosures and prevent fraudulent accounting practices. There are also regulations within the act that apply to privately held companies, such as the willful destruction of evidence to interfere with Federal Investigations.

The need for this Act arose after one too many large-scale corporate accounting scandals such as Arthur Andersen and Enron. With these big names in the news for fraud, public confidence became rather shaky.

The bill was signed into law on July 30, 2002 in hopes of reestablishing some of the public’s trust in corporations. It stands as the largest-reaching US securities legislation passed in recent years.

The Senate refers to the Sarbanes-Oxley Act as the “Public Company Accounting Reform and Investor Protection Act,” and the House refers to it as Sarbanes-Oxley, Sarbox or SOX.  

Regardless what you call it, the Act outlines how corporations must comply with the law. The Act is also intended to add stricter criminal penalties for certain acts of misconduct.

11 Titles Of Sarbanes-Oxley

There are many details outlined by this monumental Act, broken down into 11 different titles. Here are the fundamental points from each title that help make the overall premise more understandable for businesses and investors.

Title I: Public Company Accounting Oversight Board

The Public Company Accounting Oversight Board was instituted in order to manage the audit of all public corporations. The board creates and sets forth the standards and rules for auditing reports as well as inspects, investigates and enforces compliance with these rules. The board is also tasked with central oversight of the independent accounting firms assigned to provide auditing services.

Title II: Auditor Independence

In aims of removing conflicts of interest, there are nine sections within Title II that outline standards for external auditor independence. For instance, audit firm employees must wait one-year after leaving an accounting firm to become an executive for a former client. There are restrictions concerning new auditor approval and auditor reporting requirements. A company that provides auditing services to a client is not legally allowed to provide any other services to that same client.

Title III: Corporate Responsibility 

In order to further uphold accountability, regulations impose all senior executives with the individual responsibility of the accuracy of financial reports.

Title IV: Enhanced Financial Disclosures

The Act greatly increases the number of disclosures a company must make public such as off-balance-sheet transactions, stock transactions involving corporate officers, and pro-forma figures. All of these disclosures and more must be reported in a timely fashion.

Title V: Analyst Conflicts Of Interest

The point of Title V is to improve investor confidence regarding the reporting of securities analysts. This section includes codes of conduct as well as the disclosure of any and all conflicts of interests known to the company. Everything must be reported, such as if the analyst holds any stock in the company or has received any corporate compensation, or if the company is a client.   

Title VI: Commission Resources And Authority

Title VI outlines a number of practices including the SEC’s authority to remove someone from the position of a broker, advisor or dealer based upon certain conditions.

Title VII: Studies & Reports

Title VII outlines certain studies and reports the SEC and the Comptroller General must perform. These tests and reports include analyzing public accounting firms, credit rating agencies and investment banks to ensure they do not play a role in facilitating poor/illegal practices in securities markets.

Title VIII: Corporate and Criminal Fraud Accountability

Any alterations, concealment or destruction of records in hopes of influencing the outcome of a Federal investigation is punishable by fines and up to 20-years in prison. Anyone that plays a role in defrauding shareholders of publicly traded companies is subject to imprisonment and fines. Title VII also outlines special protections for whistle-blowers.  

Title IX: White Collar Crime Penalty Enhancement

There are 6 sections in Title IX, all in aims of increasing criminal penalties for white-collar crimes. This Title adds failure to certify corporate financial reports as a criminal offense, and encourages stronger sentencing guidelines in hopes of making punishments outweigh the potential for quick financial gains.

Title X: Corporate Tax Returns

 Section 1001 from Title X mandates the need for the Chief Executive Officer to sign company tax  returns.

Title XI: Corporate Fraud Accountability

Title XI includes seven sections dedicated to defining corporate fraud. It defines any tampering  of records as a criminal offense punishable under specific penalties. It also outlines sentencing guidelines and increases overall penalties. This particular Title gives the SEC the ability to freeze transactions considered “large” or “unusual.”

The Differences Between A Bookkeeper And An Accountant

Every business needs bookkeeping and accounting to remain successful, and while these two terms are often lumped together they are not the same thing.

In simplest terms, bookkeeping includes the actual recording of all financial transactions. Accounting is the process of interpreting, analyzing, classifying, reporting and summarizing the financial data.  

Bookkeeping is a generalized set of repetitive tasks, while accounting is more complex in its jobs and responsibilities. As a result, accountants require a higher level of education and experience to get the job done right.

What Does A Bookkeeper Do?

The average bookkeeper is in charge of recording basic accounting transactions including:

• Invoices from suppliers
• Cash receipts from customers
• Making sure suppliers are paid in a timely fashion
• Processing payroll
• Changes in inventory
• Petty cash transactions
• Any issues that arise with customer invoices

All of these procedures are mechanical in nature and even if the numbers change, the process follows the same routine month after month. While this data is used to generate financial statements, these statements alone are not considered complete. That’s because information generated by an accountant is necessary for a complete look at your overall financial picture.  

What Does An Accountant Do?

Accountants add to the information recorded by a bookkeeper, giving the adequate information necessary for a quality financial statement. An accountant adds the accruing or deferring expenses as well as the accruing or deferring revenue.

Additional tasks handled by an accountant include:

• Creating a general ledger
• Making the chart of accounts
• Creating customized management reports that address any issues
• Designing financial statements
• Making a budget to compare with results
• Completing a set of controls to operate the financial system within
• Using financial information to create tax returns
• Making adjustments to the classification or recordation of transactions in order to meet accounting standards
• Creating a system that records, archives and destroys unnecessary documentation

Medium to large-sized businesses generally have an accountant on board that is in charge of these procedures. These same businesses often have multiple bookkeepers in charge of recording the mass amounts of data that come in and out of the company each day.

Can Someone Be Both A Bookkeeper & An Accountant?

People often confuse the two professions because there is a lot of overlap. Both deal with finances and require understanding of financial data. Some people are trained to handle both bookkeeping and accounting, but not everyone is.

A bookkeeper can successfully tackle their line of work by taking a few accounting courses and grasping a basic understanding of accounting. On the other hand, in order to perform high quality and beneficial accounting services one needs more specialized training. That’s because accounting requires a higher level of expertise in order to handle every aspect from recording data to analyzing it and understanding what it all means. Bookkeeping simply requires someone that knows how to properly record data.

While an accountant is qualified to also play bookkeeper, their time may be better-spent analyzing data as opposed to making note of it.

Does Your Business Need An Accountant?

A few clear signs your business could benefit from the addition of an accountant include:

1. You or the person hired to do bookkeeping is not experienced or familiar with accounting processes.

2. No one at your company specializes in U.S. Tax Code. 

3. Accounting tasks are taking you or other employees away from other tasks that directly impact your ability to grow. An accountant not only shows you how to incur growth, but they free up time to pursue endeavors that lead to growth. 

4. Your company is rapidly expanding and therefore producing more paperwork and overall number crunching.

5. You notice an increase in revenue but are not seeing an increase in profits. This is not an uncommon problem, but one that should be addressed by an accountant as soon as possible.

6. You have investors that want to see professional financial reports.

7. You plan to expand your business into other states.

If your business has a bookkeeper that you rely on to generate financial reports you could benefit greatly from having a certified accountant take a look at all of the data. There are so many things the trained eye can identify to drastically improve your overall financial picture. Instead of hiring a full-time accountant, you can save money by outsourcing accounting services to DGK Group.   

8 Signs Your Small Business Should Consider Outsourcing CFO Services

When a business is seeking a greater understanding of their financial position they often turn to a CFO, a Chief Financial Officer. An outsourced CFO provides ample insights to help your business increase in strength and financial security without the same costs of hiring an experienced CFO full-time.  

By outsourcing this important service with DGK Group, your business receives the benefits of knowledgeable outsider perspective along with a whole new set of efficient tools. Plus, it’s more affordable than hiring someone in-house full-time with comparable experience. We are still available to you every day to provide fast and reliable answers, solutions, reports and so forth.   

What Can A CFO Do For Your Business?

A CFO is in charge of reporting and interpreting the financial data needed to analyze and manage the growth of your business.  The exact extent of a CFO’s responsibilities may vary based upon the needs of your company. Overall, the CFO is responsible for helping a business conduct strategic financial objectives as well as to oversee operational accounting. The CFO deals with cost control measures, cash-flow management and forecasting, budgeting, capital acquisition, and so forth.  

An experienced and knowledgeable CFO should be on top of new-wave ideas in order to work with the current culture, economic conditions, taxes, government regulations and so forth.

8 Signs Your Business Needs A CFO…

1. You Have High Transaction Rates

The overall volume of business you conduct will help determine if you need a CFO. It’s not just how much money you generate, but the number of units sold and the overall complexity involved. More transactions warrant the need for a higher level of knowledge and experience as well as attention to detail.

2. Your Business Is Undergoing Rapid Growth

Growing pains are a real thing businesses face under the pressures of rapid expansion. When orders and production increase, so too does the need for additional capital and/or financing. This is where things can get complicated and an experienced CFO becomes your best friend in terms of figuring out where to acquire additional capital and how to keep up with growth and changes.   

3. You Are Preparing For A Merger Or Acquisition

In the instance your company is preparing to merge or acquire another company it’s important to have a qualified CFO on board.

4. You Spend A Lot Of Time Playing Financial Manager

If your daily duties are becoming distracted by a heavy financial workload, you could increase your personal work potential by outsourcing a CFO. A CFO will lighten your workload and help you find new ways to accomplish more through strategic planning.

5. Your Current Financial Procedures Are Not Efficient

Outsourcing CFO services gives you instant access to a much more efficient set of financial tools. As a result, you get a clearer picture of your business without the costs of investing in new technology. This also saves you a considerable amount of time, which can be best served elsewhere. Tools provided by an outsourced CFO can help you better collaborate with vendors, bankers, lawyers, unions and so forth.  

6. Your Staff Needs Training

If your financial department could use some training to improve efficiency and overall transactions, a CFO can help guide your team in the right direction. A CFO is also a great asset in order to make business accounting operations completely transparent.

7. You Need To Increase Profitability

If you are noticing discrepancies between what’s coming in the business and what’s going out, a CFO serves as a useful tool to help you get your business back on the right track to profitability. An experienced CFO has the tools and knowledge to help you make better financial decisions that could drastically alter how much profit you generate.  

8. You Need A CFO But Don’t Have The Budget To Hire Someone Full-Time

A full-time CFO with adequate experience is going to cost you a good deal of money in terms of annual salary. It’s not typically beneficial to sacrifice experience in order to pay less in salary. Instead, you can outsource CFO services to DGK Group and reap all the benefits of a truly experienced professional for a fraction of the cost to hire someone of equal experience full-time.    

6 Tips For A Successful Merger And Acquisition Process

Acquiring a new company is about more than just gaining a lead on the market. It’s about combining two separate entities into one successful force. The process includes merging computer systems, financial challenges and marketing teams, plus so much more. Mergers equate to a lot of work, but when done properly can lead to a lot of rewards.

Around 80% of mergers fail due to a number of easy to make mistakes, even for seasoned business professionals. Here are some important tips to consider when going through the M&A process for the most successful outcome possible.

1. Broaden Your Outlook Along With Your Brand

It’s important to recognize that any M&A results in a new company that requires a fresh outlook. It’s not just your company growing larger. Instead, it’s about adapting your mindset for a successful integration of two separate companies.  

You’ve got Culture A (your business) and Culture B (business you are acquiring), and you must create a Third Culture that combines both. Both businesses have their own unique culture and it’s your job to build the necessary bridges for the best of both to survive and thrive.

2. Know Where Your Business Stands Financially

Before entering any agreements it’s so important that you have a strong understanding of where your business stands financially, before and after the acquisition goes into play.

There was a time when it was all about profits and loss but now businesses see the importance of looking at liquidity. Does your business have enough liquidity to successfully pull off the transaction?

Acquisitions offer an exciting entryway to growth but it’s important to consider the strain it will place on company finances. Are you completely confident in its ability to carry this burden, and do you have the right capital funding strategies in place to handle anything that comes your way?

3. Rely On Your Team Via Clear Communication

Your team must be there to help assist the success of the merger so it’s important that they are in the know about what’s going on. Without clear communication and direction, worker morale will greatly suffer, ultimately hurting the success of your business.

If you need additional assistance pulling things off, you may want to bring in a team of temporary, specialized leaders that can help your business throughout the process in immeasurable ways.

4. It’s Not Just About Finances

One of the largest mistakes companies make during the M&A process is to view it as strictly financial. There are too many people with real feelings to ignore the non-financial side of things.

Communication is key, as listed above, but so too are presenting methodologies, teaching best practices, providing solid leadership, offering evaluations and reinventing the company from the bottom up. Large-scale collaborative efforts for creating change get everyone involved and feeling like a part of the change, as opposed to a victim of it.

5. Have Clear Goals

M&A strategies must include a clear set of goals including what you plan to do with your business and where your highest values rest.  This includes everything you plan to gain from the transaction. For instance, do you plan to gain market share? Do you plan to acquire new products or intellectual capital? Are you trying to beat out the competition by becoming the low-cost company dominating your industry?

Your goals are the most important component of the entire deal. An experienced financial consultant can help decipher the best ways to go about achieving all of your goals, and then some.

6. Turn To DGK Group

DGK Group has extensive experience working with companies going through the process of M&A. As a result, we have the insights necessary to give you a leg up during this often-trying time. Don’t go at it alone, we can help you prevent many common mistakes and enjoy greater success.