SOX Compliance and Private Companies

Published June 10, 2019 • < 1 min read

The Sarbanes-Oxley Act is a U.S. federal law; all public companies doing in business in the United States must comply with the regulation. SOX compliance activities include identification and testing of internal controls over the financial reporting process and submitting specific financial certifications within quarterly and annual reports to the SEC.

The majority of the Sarbanes-Oxley Act requirements only apply to public companies doing business within the United States. However, some portions of the SOX regulation apply directly to private companies, including the penalties for destroying, falsifying or altering records and documents, and the penalties for retaliation against whistleblowers.

Privately held companies considering or preparing for their initial public offering (IPO), or looking for ways to increase their competitive advantage may benefit from implementing a SOX compliance program. A strong internal control environment can improve efficiency during due diligence processes should an acquisition by a public company be on the horizon. Additionally, the company would be better prepared for initial public offering activities if internal control frameworks and risk assessment activities have already been implemented by the company.  

Regardless of acquisition or IPO activities, some private companies have decided to implement compliance programs which cover applicable SOX requirements in order to enhance corporate governance, establish or improve internal controls and strengthen their financial reporting processes.

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