“The Sarbanes-Oxley Act was passed in 2002, after corporate scandals
involving fraud and regulatory mismanagement in companies such as
Enron and WorldCom. The Act dictates how all public companies are
required to disclose financial information” (Magloff). The requirements
are as follows: Ensure financial data security, prevent malicious
tampering, trach data breach attempts, keep event logs readily
available, and demonstrate compliance in 90 day cycles (Tunggal,
2022). The penalties range from loss of insurance and delisting from the
stock exchange to huge fines and imprisonment.
“Because the Act requires a high level of financial reporting and internal
auditing, it can place a burden on smaller companies to make sure they
are in compliance” (Magloff). Large businesses typically have auditors
and accountants intern but it can be costly for small businesses to hire
this out. In order to stay in compliance, outside sources will need to be
hired and some small businesses do not want this extra cost associated
with the business. Larger companies can also design their own financial
system where small businesses have to utilize something premade and
adapt it to their business type – without accounting knowledge, this
can be difficult to do.
https://smallbusiness.chron.com/comprehensive-audit-17645.html
https://www.upguard.com/blog/sox-compliance
