Presentation Chapter 13

Presentation Chapter 13 - Corporate Governance in Private...

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Click to edit Master subtitle style Corporate Governance in Private and Not-for–Profit Organizations Chapter XIII
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Click to edit Master subtitle style Chapter Objectives: • Discuss the purpose and roles of NPOs. • Evaluate SOX and its potential application to private companies and NPOs. • Present the corporate governance principles, mechanisms, and functions found in public companies in a comparable structure for use in private companies and NPOs. • Elaborate on the duties of the audit committee of NPOs. • Reiterate the importance of an effective internal control structure for entities of all types and sizes.
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Click to edit Master subtitle style Key Terms Articles of Incorporation charter Development/fundraising committee Executive committee Finance committee Nonprofit Integrity Act of 2004 Not-for-profit organization Personnel committee Program committee Society of Corporate Secretaries and Governance Professionals Whistleblower programs
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Should private companies and not-for-profit organizations and their executives care about the provisions of SOX? Definitely yes. Section 209 of SOX opens the door to possible state actions. State regulators have adopted many provisions of SOX (e.g., audit committees, internal control reporting) as part of their “best practices”. Private companies may choose to comply with provisions of SOX because: (1) they may go public or sell their business to a public company; (2) they may desire to make their business more effective and efficient through SOX compliance; and (3) their suppliers, customers, or even their government may require compliance with SOX provisions. Regulators in several states including New York, California, and Virginia are applying provisions of SOX to NPOs. NPOs are adopting provisions of SOX to improve their corporate governance, financial reporting, internal controls, and audit activities. 13
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SOX Impacts on Private Companies Private companies, like public companies, are subject to the requirements of state law and these corporate governance best practices: Establishing an appropriate “tone at the top” promoting ethical, legal, and professional conduct throughout the company Developing and maintaining adequate and effective internal controls in general, and internal control over financial reporting to ensure operational effectiveness and efficiency, reliability of financial reports, and compliance with applicable laws, rules, and standards 14
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SOX Impacts on Private Companies Establishing antifraud programs to prevent, detect, and deter misappropriation of assets and misstatements of financial reports Using best practices and provisions of SOX to improve governance, transparency, and accountability Establishing whistleblower programs Establishing independent board committees to oversee financial reporting of internal controls, audit activities, and governance matters 15
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SOX Impacts on IPOs Examples of reforms that can be planned in advance of the IPO process
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Presentation Chapter 13 - Corporate Governance in Private...

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