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Sarbanes Oxley and Financial Literacy

Issue # 111705

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This issue of Competence News contains:

• Announcement - Sarbanes Oxley Simplified
• Christmas Gift - Complimentary Sarbanes Oxley Resources - Navigable Act, Glossary, Course Outline, Useful Links
• Editorial - Merry Christmas and Happy New Year!
• Word Gems - Free Interactive "Knowledge Objects" on Business Finance, Investing and the basics of Computer Technology
• Contact Us

We are delighted to announce a new Competence Software course. The course is in its final stages of testing and proof reading. It will ship in early January - 2006.

The purpose of this course is to make the Sarbanes Oxley Act of 2002 as understandable as possible to those who have a vested interest in understanding this law and what it means to ones financial well being, to one’s job security and, literally, to one’s freedom.

This would include anyone who is employed by or invests in a publicly owned company in the U.S. as well as those who provide professional services to these companies and advice to the investing public.

The Problem

The Sarbanes Oxley Act of 2002 was passed by the U.S. Congress in order to protect the investing public from the unethical reporting practices of a relatively small number of individuals.

These individuals operated in three general areas:

• corporate America as executives;
  
• in large accounting firms whose business it is to verify the honesty and accuracy of the procedures used to report financial results;

• in large investment services firms whose business it is to buy and sell shares and advise the public on what to buy and sell.

These individuals falsely and/or dishonestly reported the statistics and other data on the financial condition of companies whose ownership shares were publicly traded on various stock exchanges. They did so in order to personally profit at the expense of the average investor.

The stock market lost trillions of dollars in value in the year 2000. The losers were the average investors. The gainers were the unethical few who made huge fortunes.

Politicians responded to the outrage of the public when the stock market crashed. The Sarbanes Oxley Act was passed as a result. It is named after a Senator and a Congressman who sponsored the law and pushed it through the U.S. Congress.

One can conclude that the problem that is sought to be solved by the Sarbanes Oxley Act is a problem in ethics.

The percentage of unethical individuals engaged in business is, most likely, much smaller than the percentage of ethical individuals. To postulate otherwise is to postulate a criminal society.

Yet the Law applies to and is enforced on the management of every publicly owned company and every accounting firm that works with the public company to prepare accurate financial reports.

There were and are laws and rules in existence that had already covered much of what Sarbanes Oxley seeks to solve. Compliance with this new law requires considerable time and expense for all. This ends up penalizing those that are ethical in that it adds to the time and expense they now need to invest in complying with the new law.

Be that as it may, the law is passed and must be understood and complied with if one is to play the game called publicly owned business.

A more optimistic viewpoint (a viewpoint that we wish to assume in this course) is that corporations should use the fact that compliance with the law represents an opportunity to streamline and make more effective their internal operations and financial tracking, control and reporting procedures.

Approached from that viewpoint, Sarbanes Oxley can be viewed as an opportunity to bring about a more ideal scene as regards the operational ethics of individuals who play this game of business.

The Solution

Learn the law and learn how to read and understand financial reports.

We designed "Sarbanes Oxley Simplified" to help not only understand the law but to also enlist the support of every employee of a publicly owned company in helping management install and operate effective financial reporting systems.

Our "Financial Competence" course can teach anyone how to read and understand financial reports. In the process the course also gives one a thorough command of the basics of business finance.

We hope you will join the hundreds of thousands of business people who have used our courses to help gain a good command of the language of business finance - an essential skill for anyone engaged in business.

Christmas Gift - Sarbanes Oxley Resources

As our Christmas gift we have present the first 3 lessons of Sarbanes Oxley as well as navigable copies of the full Sarbanes Oxley Act in two different formats with cross links to our robust "Sarbanes Oxley Key Terms Glossary". Additionally, you may download an outline of the full course to be shipped in early January 2006. Click on SARBANES OXLEY RESOURCES link to access your gift.

Honest financial reporting has become a shared responsibility. The Sarbanes Oxley Act of 2002 is now implemented and operating in America. The law requires that the CEO and CFO of each public company in the U.S. certify their financial reports. It is no longer sufficient to have a large auditing firm review the procedures used to gather, record and report on the myriad of financial transactions that occur daily in any business.

Additionally, top management must install financial controls that deliver accurate, honest and transparent (understandable) financial reports.

This responsibility does not just rest with top management. Every manager, supervisor and, indeed, every employee must share responsibility for the accuracy and honesty of financial reports. That requires a degree of financial literacy.

Yet how many individuals, really, in business today can read and understand financial statements?

One would not expect to succeed doing business in China if one did not understand Chinese. How, then can anyone expect to prosper in business without a good command of the language of business?

In 2006, Competence News will focus on financial literacy with an emphasis on the basics - something that was broadly missing from the last financial boom. And something that is still missing today.

We wish to take this opportunity to thank our several hundred thousand course users in corporations large and small for their support for the 13 years we have been providing interactive finance and investment courses.

Have a great Christmas and prosperous New Year!

All the best!

Larry Byrnes
Editor
Competence News

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