The Sarbanes Oxley Act of 2002 was adopted on July 30, 2002 in order to place safeguards and controls on publicly traded companies with the hope that this would restore public faith in such companies and protect the integrity of financial reporting and the auditing process. Non-profit organizations are also being affected be this legislation. Points of special consideration for Non-profit organizations are:
- The role of the audit committee and the background and skills of its members.
- Assess the need for a separate audit committee.
- Verify that the roles and responsibilities of the Board and its committees are clearly documented.
- Make certain that the Board has the necessary financial and accounting expertise to operate effectively.
- Review the relationship of the audit committee, management, and the external auditors.
- Ensure that responsibilities overseeing the relationship with the external auditors rests with the Board and not with the management.
- Assure that the Board pre-approves all non –audit services provide by the external audit firm.
- Formalize policies regarding conflicts of interests, management policies, and fiduciary responsibilities.
- Ensure that there exists no conduct (favoritism or conflict of interest) that could potentially damage a non-profit organizations reputation.
- Evaluate compensation agreements with board members to ensure that conflicts of interests do not exist between audit committee members and the organizations they govern.
- Assess the organization's internal control structure and business risks.
- Make certain financial reporting is accurate and easily verifiable.
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