You may be the owner of a small/medium size business and ask yourself, What does SOX (Sarbanes-Oxley Act) have to do with my business? Since SOX was designed to protect investors and creditors of public companies, that does not mean that some provisions of the act cannot help your business. Section 404, specifically, requires management to report on the effectiveness of their internal financial controls.

Being aware of how such controls can impact a business can make the difference between a successful operation and a losing one. The main reasons that a small business may want to create strong internal controls are:

1). The focus of strong internal controls is on getting the financial statements right. This can address and help prevent future or potential problems.

2). An outside party such as a banker or accountant recommends it.

3). It can solve present business problems and/or help prevent fraud.

4). The potential to go public.

5). A Sox-compliant customer may require it.