In a new survey commissioned by Robert Half International, 1,356 CFOs from privately held companies were asked to address the issue of governance. Thirty-eight percent of 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.

 

The results of the survey support the findings in a white paper, "The Impact of Sarbanes-Oxley on Private Business." Also released by RHI, the white paper summarizes 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.

 

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.

 

According to the white paper, some private companies are already moving forward with implementing new corporate governance practices. In a separate 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.