Liability and timeline questions 2707

  • I am new to SOX but understand it addresses Financials.
    Third party company © notifies CEO and CFO of company (A) of over charges by company (B). Over charges were found to occur for many years and could be in the Billions. Since amount would contribute to total shareholder value and have statute of limitations effecting collections would company (A) have a timeline through SOX to get this corrected? If Company (A) ignored or didn’t address this issue would there be a liability? If so, to whom?

  • Hi - The purpose of SOX is more oriented in setting up assurances and controls for people, financial transactions, and financial automated systems, after identifying key material exposures. The scenario shared where newly discovered issues need resolution is probably more applicable for legal council and contract law.
    SOX is used as an enforcement approach by the SEC for a specific company. I’m not aware of a statute of limitations for resolving company-to-company issues. In most cases, collecting previously owed funds should be accounted for in the current fiscal periods rather than adjusting past annual statements.
    Once the matter is more settled and company ‘A’ is refunded any signficant monies, than the collection/control of this could fall under SOX guidelines to ensure complete accountability and to implement safeguards to prevent material risks. Your SOX external auditor might be a good resource to check with as you all progress with this issue for any application of these controls if significant monies are returned.

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