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COPYRIGHT 2002 National Association of Credit Management
Reducing Credit Risk: Are Your Publicly Traded Customers' Financial Statements More Reliable in Light of New Federal Legislation?
A Review of the Sarbanes-Oxley Act of 2002 and What It Means to the Credit Professional
Headlines of corporate fraud within public companies, from Enron to Adelphia to WorldCom, has prompted the U.S. Congress to overwhelmingly pass federal legislation providing for accounting reform and requiring more accurate financial disclosure and reporting from public companies. This new federal legislation penetrates the area of corporate governance, which traditionally had been left to the states. President Bush has stated that corporate officers must be accountable and the integrity of financial reporting must return.
The Sarbanes-Oxley Act of 2002 (SOA) was signed into law on July 30, 2002, to combat the wave of accounting and financial reporting scandals and corporate bankruptcies. SOA focuses on the conduct of corporate officers and public accounting firms and adequate disclosure in public company financial statements. How will the law affect credit professionals and their publicly traded customers? Will the law change the way corporate officers, accountants and lawyers deal with financial disclosures? Will financial information reported by public companies become more reliable, thereby reducing credit risk for vendors selling on open account?
FEDERAL GOVERNMENT OVERVIEW
SOA provides that the Securities and Exchange Commission (SEC) enforce the legislation and has earmarked $766 million for SEC enforcement. Much...
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