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Does Sarbanes Oxley require companies to conduct random

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audits of their vendors/suppliers?...
Does Sarbanes Oxley require companies to conduct random audits of their vendors/suppliers?
Submitted: 8 months ago.Category: Finance
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11/22/2017
Financial Professional: Lane, JD, CFP, MBA, CRPS replied 8 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 14,656
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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No, and if you are not a publicly traded company, SOX may not apply to you anyway.

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Although, even though Sarbanes-Oxley (SOX) was passed to combat corruption at big public companies like Enron, WorldCom, Tyco, Adelphia, Global TelLink, HealthSouth, and Arthur Andersen, Small and not-for-profit companies are finding that it's a best practice to adopt many of the same standards if they want to get insurance, attract investors and donors, and repel lawsuits.

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But auditing vendors is something that might be a bit of a stretch for a private company. Likely there's no authority to do so. And in fact could be an invasion of right to privacy issue (a civil law issue).

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However, two organizations can always agree to this OR an organization can refuse to do business with a vendor that won't submit to an audit. That's simply a contractual/negotiation issue between the two organizations.

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The general checklist for SOX-like practices for private companies are as follows follows:

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    Form an audit committee. Your company’s audit committee should consist of independent directors who sit on the board and ensure the integrity of your company’s audit process. After SOX, it’s tough to explain to investors and regulatory authorities why your company never got around to convening an audit committee.Combat Section 404 audit-chondria and policy paranoia.Auditors and governance officers want to shine by conscientiously complying with SOX Section 404. However, they have to do their jobs within the bounds of budget and reason. Not every audit issue deserves full-throttle testing, and not every trivial process needs accompanying polices and controls.Prevent whistle-blower complaints from becoming lawsuits.Every company has its share of complainers and malcontents. However, when employee or vendor complaints regard matters than can affect the company’s financial statements, the issues need to be fully documented and vetted.Keep a lid on insurance premiums. Increasingly, insurance companies are looking at SOX compliance as an unofficial underwriting criterion in quoting officers’ and directors’ liability policies and other coverage relative to companies’ exposure. Put simply, SOX compliance can save premium dollars.Be credible in raising capital. No investor or donor wants to assume unnecessary risk. Documenting your company’s compliance with the relevant aspects of SOX shows creditors and donors that your company operates in an ethical, controlled environment and that its future growth is a good bet.Deal with real data in making decisions. No company can make good decisions if its financial data is speculative and its procedures are hazy. The good news about SOX is that it has created spinoff software tools and checklists to help your CEOs, CFOs, and other management team members get a handle on what’s happening with your company.Figure out if SAS 70 applies to you (even if the rest of SOX doesn’t). If your company provides services to publicly traded companies, your clients may be asking you for an SAS 70 report. Even if you don’t have to comply with SOX, your customers may have to document that they only outsource to service providers with good internal controls in place and may be looking for you to provide the appropriate SAS 70 documentation.Communicate about control. When a company experiences a breach of ethics or internal control, it’s important to be able to trace the company communications to see where the breakdown occurred. Clear communications about controls, procedures, and ethics can protect conscientious management and employees at all levels while laying the blame on those attempting to circumvent SOX standards. The SOX spinoff market has produced tools and checklists to test communication as well as other types of control. Prepare management for new levels of liability. SOX places more responsibility (and potential liability) on management than ever before. Management needs to understand what it can no longer delegate under SOX and develop a strategy for maintaining control over what can be handed off to others.Adopt a code of ethics, and mean it. Every company should adopt a simple code of ethics and communicate it to everyone in the organization. In any company, new situations that aren’t covered by specific policies will arise. However, in the post-Enron era of SOX, the company’s code of ethics should cover everything.
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Financial Professional: Lane, JD, CFP, MBA, CRPS replied 8 months ago

Finally, even small companies that technically don’t have to comply with SOX Section 404 may be asked to provide certifications about their internal control to their clients who do have to comply using this form. sas-70

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In 2011, Statement on Standards for Attestation Engagements (SSAE) No. 16 took effect and replaced SAS 70 as the authoritative guidance for performing a service auditor's examination. SSAE 16 established a new attestation standard (AT 801) to contain the professional guidance. You can learn more about SSAE 16 at www.ssae16.com

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Financial Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago
Hi, Lane here.
...
I’m just checking back in to see how things are going.
...
Did my answer help?

If so, I'd appreciate a positive rating, using the stars on your screen, and then clicking “submit" – That’s the only way I’ll be credited for the work.

But if you need more on this please let me know

Lane
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