[Solution]Benefits and consequence if the Sarbanes Oxley is repealed

About the Consequences аnd Benefits Assignment The purpose of the Consequences аnd Benefits assignment is to assess the consequences and outcomes of implementing уour proposed…

About the Consequences аnd Benefits Assignment
The purpose of the Consequences аnd Benefits assignment is to assess the consequences and outcomes of implementing уour proposed solution and to defend уour solution against barriers.
In this section of the project, you will predict and assess the likely consequences of implementing the solution you are proposing by:
assessing ideal or expected outcomes
defending your solution against reasonable barriers
Assignment Guidelines
An effective Consequences and Benefits assignment typically will follow all conventions of APA-style academic writing and citation, defend original arguments, and effectively criticize and integrate information drawn from secondary sources; specifically, this assignment is your opportunity to predict likely outcomes and consequences, which would help decision makers accept your proposal.
Format Specifications
Word Count: 700-900, double-spaced
Style Format: APA
Citation Format: APA In-text and reference list
Number of Credible Sources: 3
This is the proposal
The Effects on Nonprofit Organizations if the Sarbane-Oxley Act is repealed
Celida Roca Montell
Solution Proposal, and Budget Narrative Assignment Guidelines
08/18/2017
 
 
 
 
The Effects on Nonprofit Organizations if the Sarbanes-Oxley Act is repealed
Introduction
Nonprofit organizations refer to businesses which have been offered tax-exempt status by IRS (Internal Revenue Service). They usually source funds from donors. These donations are tax deductible to donors while non-profit organizations are obligated to make operating and financial information public so that the donors can be convinced that their contributions have been effectively used (Grunewald, 2008). In the world, today, nonprofit organizations have faced numerous fraudulent cases. This aspect has created an urge to implement the Sarbanes-Oxley Act in non-profit organizations to enhance financial transparency and responsibility. The nullification of this act can greatly affect the non-profit organizations adversely as the document below analyzes.
Background information
Sarbanes-Oxley Act also termed as SOX Act is an act that was enacted by the US Congress in the year 2002. Its main objective was to protect the investors from corporations’ fraudulent accounting activities. SOX mandated stern reforms to enhance financial disclosures from the corporations as well as to prevent the accounting fraud. The Act was enacted as a result of early 2000s’ accounting malpractices in public institutions such as Enron Corporation. The Act’s sections 302 and 404 are its key provisions. Section 302 necessitates the senior management to approve the financial statement’s accuracy while section 404 requires the auditors and the management to establish reporting methods and internal controls (McNally &Steuer, 2006). The Act also outlines the necessity of information technology departments. The IT department as per the Act is mandated to store information although it does not specify the period which information should be stored.
Sarbanes-Oxley Act’s relevance to nonprofit organizations
The nonprofit organizations are currently under a significant pressure to be both transparent and responsible financially. Although Sarbanes-Oxley Act was meant for public organizations, it can act as a blueprint to enhance clarity for the nonprofit organizations’ financial status (Luoma, 2010). It has, therefore, been proposed that this Act need to be broadened so that it can be incorporated in the nonprofit organizations. The responsible non-profit organizations have applied the Act as their financial practices’ standard. These practices help in improving the nonprofit organizations’ internal controls as well as to offer the required financial activities’ transparency.
In nonprofit organizations, the Act applies in a number of ways. One of the ways is that it governs the director’s audit committee requiring every committee member to be a board member and independent. In other words, none of the members should be receiving payment. The audit committees are also required to have a financial expert or explain why an expert is not appropriate. This committee oversees the activities of the outside auditor (Nezhina&Brudney, 2012). Secondly, the Sarbanes-Oxley Act governs the auditors’ responsibilities. It also requires the auditing firm’s lead partner to be rotating off the audit after a period of five years. The organization can change the audit firm although it is not mandatory.
The nonprofit boards are also required to change the lead auditors after every five years to ensure that the auditing firm remains alert rather it does not fall asleep as a result of overfamiliarity. They are also not required to mix the non-auditing and auditing services so as to prevent conflict of interest. Thirdly, the Act calls for the chief financial officer and chief executive of a public company to certify the financial statements, attest their appropriateness, and present an accurate financial condition of the company (Luoma, 2010). Nonprofit organizations are also required to have a chief financial officer who will be certifying the financial statements while the organization’s CEO is required to be ultimately responsible.
Effects of nullification of SOX on nonprofit organizations
From the above context, it is clear that nonprofit organizations are immensely benefiting from the application of Sarbanes-Oxley Act in their financial aspects. It is clear that it enhances financial transparency and responsibility. If SOX is repealed, it will give the nonprofit organizations’ management a room to involve themselves in fraudulent activities. This will affect the organization adversely in that the cash corrupted will not accomplish the intended role. This implies that the beneficiaries will have to go without the goods or services they usually gain from the organization (McNally &Steuer, 2006). Secondly, the donors and sponsors will be disappointed to understand that their donations are being misappropriated. This can force them to withdraw their donations, and this will consequently affect adversely people relying on these organizations for their sustenance. In other words, the sustainability of nonprofit organizations is dependent on its financial transparency since they cannot stand on their own rather they must rely on donors. The nullification of Sarbanes-Oxley Act is likely to lead to the closure of numerous nonprofit organizations.
Conclusion
Sarbanes-Oxley Act is a crucial aspect for the nonprofit organizations as the above discussion has revealed. These organizations’ stability is determined by how they deal with their finances. Without transparency, chances of these nonprofit organizations to collapse are very high since not many donors will be willing to support a firm that is not using funds responsibly and transparently. Sarbanes-Oxley Act, therefore, need to be broadened legally to cover all the nonprofit organization’s financial activities.
References
Grunewald, D. (2008). The Sarbanes-Oxley Act Will Change the Governance of Nonprofit Organizations. Journal of Business Ethics, 80(3), 399-401.
Luoma, P. (2010). The Impact of Sarbanes-Oxley on Nonprofit Governance Practices. International Journal of Global Management Studies Professional, 2(2), 1-14.
McNally, J. S., &Steuer, J. T. (2006). Can Sarbanes-Oxley hold the keys to nonprofit governance? Accounting Today, 20(3), 6-25
Nezhina, T. G., &Brudney, J. L. (2012). Unintended? The effects of adoption of the Sarbanes-Oxley Act on nonprofit organizations. Nonprofit Management & Leadership, 22(3), 321-346.

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