WHITE PAPER EXAMINES CORPORATE GOVERNANCE TRENDS IMPACTING PRIVATE BUSINESSES
CFOs See Value in Adoping New Accounting Standards, Survey Shows
MENLO PARK, CA -- Should privately held companies apply corporate governance standards that are mandated for publicly traded companies to their own businesses? Many financial executives from nonpublic companies say yes. In a new survey, 38 percent of chief financial officers (CFOs) said private firms would benefit from implementing the same practices as are required of public companies under the Sarbanes-Oxley Act of 2002; 38 percent of respondents were undecided.
Robert Half International Inc. (RHI), the world’s first and largest provider of specialized staffing in the fields of accounting and finance, recently released a white paper on this subject: The Impact of Sarbanes-Oxley on Private Business. The report summarizes lessons learned in the wake of corporate scandals, as well as information on which types of private organizations could be most affected by accounting reforms and how some privately held firms are more closely examining their own financial disclosure processes.
RHI recently commissioned a survey of 1,356 CFOs from privately held companies to address the issue of governance. The results of the survey support the findings in the white paper. CFOs were asked, “Do you agree or disagree that private companies should implement the same type of governance and control practices that the Sarbanes-Oxley Act of 2002 requires of publicly held firms?” Their responses:
Dont know/no answer
The survey was conducted by an independent research firm and is based on a stratified random sample of private U.S. companies with 20 or more employees. Executives surveyed at the largest firms were more likely to believe accounting regulations should also apply to the private sector. Fifty-two percent of CFOs from firms with 500 or more employees agree that nonpublic companies should take action in response to Sarbanes-Oxley, while 37 percent of CFOs from companies with 99 employees or less advocate change.
Some private companies are already moving forward with implementing new corporate governance practices, according to the white paper. In an RHI survey released in March 2003, 58 percent of CFOs from private firms said they were taking measures such as reviewing or altering their current accounting procedures, expanding their internal audit functions, and hiring outside consultants for internal audit work.
“A growing number of private entities are using the Sarbanes-Oxley Act as a model for creating stronger accounting and governance practices,” said Paul McDonald, executive director of Robert Half Management Resources, a division of RHI that specializes in providing senior-level accounting and finance professionals on a project basis. “While not all aspects of the legislation apply to every company, the concepts Sarbanes-Oxley addresses promote better financial management for any firm.”
Research for the white paper also revealed additional practices private firms are adopting to enhance their corporate governance and internal control processes. These include certifying financial statements to external parties, adopting a formal code of ethics, and separating professional services provided by external accounting firms to avoid potential conflicts of interest.
“Firms that are proactively improving their financial processes will have the ability to detect errors or fraud early on, enhance their credibility with key stakeholders and be in a better position to establish credit,” McDonald said.
Robert Half International’s financial divisions include Robert Half® Management Resources, Accountemps® and Robert Half® Finance & Accounting, for project, temporary and full-time professionals, respectively, in the fields of accounting and finance. The company serves its clients and candidates through more than 320 offices worldwide and through online job search services on its divisional websites, all of which can be accessed at www.rhi.com. RHI is also the parent company of Protiviti Inc., a leading independent risk consulting and internal audit firm.