NACM teleconference explains basic SOX facts.(National Association of Credit Management)(Sarbanes-Oxley Act of 2002)

Credit professionals are among the group of officials in public corporations that need to know about the auditing and internal control requirements imposed by the Sarbanes-Oxley Act of 2002, also called SOX. Those credit professionals who signed up to listen to an NACM teleconference on August 7, entitled, "The Implications of the Sarbanes-Oxley Act on the Credit Department" got an opportunity to learn important facts on how the law applies to them from Wanda Borges, Esq. of Borges & Associates, LLC, who is an expert in various aspects of the law pertaining to business credit professionals.

Borges pointed out that SOX requires strict standards of certified internal controls of public corporations as well as requirements that help ensure outside auditors have no financial relationships with the companies they audit. The law was passed in the wake of highly publicized corporate accounting scandals, such as Worldcom and Enron. Certifications of financial statements and audits that are required by SOX of CEOs and COOs are also filtering down to credit managers, she said, as companies confer a level of responsibility down the chain of command to other major corporate personnel involved in critical financial operations. She referred to these additional certifications as mini-certifications. "All of this trickles down to you, the credit executives," Borges added. "Many of you credit executives are becoming more and more responsible for signing-off on these mini-certifications."

With regard to outside auditors, Borges mentioned the Public Company Accounting Oversight Board (PCAOB). The PCAOB is a private sector, non-profit corporation created by SOX to oversee the auditors of public companies in order to protect the interests of investors and ensure audit reports are fair, independent and informative. One of the mandates of SOX is that no senior manager of an audit firm can be responsible for an audit for over five years. Borges said by the third or fourth year, a junior manager on the team should be preparing to step up to the senior manager role.

Certifications of audits by key company officials are designed to ensure that financial reports are based on knowledge, are factual and that there's no misstatement of material facts. Borges described material facts as those facts that could change the financial outcome of a company: "SOX doesn't care if a mistake is made. SEC officials want you to find out how the mistake was made--and fix the system to make sure it doesn't happen again. If a mistake was made, tell the SEC what it was, how it happened and what was done to make sure it doesn't happen again."

Borges advised credit managers, who oversee the extension of ...