Private Companies Consider Accounting Changes

Compiled ByTonya Vinas The Sarbanes-Oxley Act requires public companies to shore up their accounting practices, but what's going on with privately held companies? It's a mixed bag, according to a recent survey of 1,400 private-company CEOs. Robert Half Management Resources, Menlo Park, Calif., found that 58% of responding CFOs are implementing new practices in response to the new regulations. These include reviewing and/or changing accounting procedures (44%), enhancing internal audit functions (36%), hiring a consultant (23%), restructuring executive compensation packages (8%), and other steps (2%). (Multiple answers were allowed.) Thirty-seven percent of those surveyed said they aren't taking any of the aforementioned steps, and 5% said they don't know what, if any, steps, they would take. This isn't a good strategy, according to Paul McDonald, executive director of Robert Half Management Resources. "Private businesses need to be aware of areas in which vulnerabilities may exist within their organizations. . . Private firms planning to go public, obtain major financing, enter into long-term agreements with public corporations or be acquired by a public entity will need to address accounting and financial disclosure requirements mandated by the [Sarbanes-Oxley] Act."