Kenneth Cole Gets Serious Kenneth Cole Gets Serious About About Sarbanes-OxleySarbanes-Oxley

Group E:Group E:

TonyTonyMohammadMohammad

LeoLeo

IntroductionIntroduction

SOX SOX BackgroundBackground RequirementsRequirements ComplianceCompliance

Kenneth ColeKenneth Cole BackgroundBackground SOX ImplementationSOX Implementation

ConclusionConclusion Importance of SOXImportance of SOX

Basic history of the Sarbanes-Basic history of the Sarbanes-Oxley ActOxley Act

Became a public law in July 2002Became a public law in July 2002

The House passed Representative Michael Oxley’s bill in The House passed Representative Michael Oxley’s bill in April 2002April 2002

Maryland Senator Paul Sarbanes’ bill passed the Senate Maryland Senator Paul Sarbanes’ bill passed the Senate Banking Committee in June 2002Banking Committee in June 2002

The House and the Senate formed a Conference Committee The House and the Senate formed a Conference Committee to reconcile the differences between both bills and the to reconcile the differences between both bills and the Sarbanes-Oxley Act of 2002 was enacted Sarbanes-Oxley Act of 2002 was enacted

The Sarbanes-Oxley Act was signed into law by President The Sarbanes-Oxley Act was signed into law by President George W. Bush (funny) George W. Bush (funny)

What does the Sarbanes-Oxley Act What does the Sarbanes-Oxley Act require?require?

SOX requires chief executives and chief SOX requires chief executives and chief financial officers of public companies to certify financial officers of public companies to certify that their company’s financial statements filed that their company’s financial statements filed with the Securities Exchange Commission (SEC) with the Securities Exchange Commission (SEC) are materially accurate and complete, and that are materially accurate and complete, and that in all material respects they present fairly the in all material respects they present fairly the financial condition and results of operations of financial condition and results of operations of the issuer. These certifications subject the the issuer. These certifications subject the signers to potential civil and criminal liability for signers to potential civil and criminal liability for false certifications. false certifications.

How may companies become SOX How may companies become SOX compliant?compliant?

Have company wide documentation processesHave company wide documentation processes Refresher accounting courses for all key Refresher accounting courses for all key

personnelpersonnel Audit departments devoted to insuring accurate Audit departments devoted to insuring accurate

financial recordsfinancial records Workflow and document controlWorkflow and document control Divisional heads held accountable for their Divisional heads held accountable for their

divisionsdivisions Honest executivesHonest executives

Kenneth ColeKenneth Cole

BackgroundBackground Established in 1982 in Midtown ManhattanEstablished in 1982 in Midtown Manhattan Operates 94 retail and company storesOperates 94 retail and company stores Went public in June 1994Went public in June 1994 $468 million specialty apparel retailer$468 million specialty apparel retailer

Kenneth ColeKenneth Cole

Subject to provisions of the Sarbanes-Oxley Act Internal audit and finance personnel jointly

conduct informational seminars for all managers

Created a third-party company to accept anonymous reports from employees about SOX violations

Identified and documented all processes and controls in all business units

SOX ImplementationsSOX Implementations

Excel and other spreadsheet applications posed unacceptable risks to accurate reporting, such as: incorrect formulas, data entry and translation errors, and excessive responsibility placed on individual users.

Solutions: HandySoft SOXA Accelerator

Business process management platform Tequila Software Retail Lease

Budgeting and monthly payment processing Counterpoint Systems Pelican ProFiles

Manage licensing activities and revenue

Why the need for SOX?Why the need for SOX?

Sarbanes-Oxley passed in response to a number of Sarbanes-Oxley passed in response to a number of major corporate and accounting scandals major corporate and accounting scandals EnronEnron WorldComWorldCom

These scandals resulted in a decline of public trust in These scandals resulted in a decline of public trust in accounting and reporting practicesaccounting and reporting practices

Many people lost all of the retirement money, homes, Many people lost all of the retirement money, homes, families, and other things of importancefamilies, and other things of importance

SOX protects shareholders’ investmentsSOX protects shareholders’ investments

Basic retailing knowledge for retail Basic retailing knowledge for retail CEO & CFOCEO & CFO

Understand gross marginUnderstand gross margin Basic concept of merchandise planningBasic concept of merchandise planning Beginning of month (BOM) stockBeginning of month (BOM) stock End of month (EOM) stockEnd of month (EOM) stock Stock-to-Sales RatioStock-to-Sales Ratio Income statementsIncome statements Gross salesGross sales FIFO (first in, first out)FIFO (first in, first out) LIFO (last in, first out)LIFO (last in, first out)

SOX VideoSOX Video

Compliance IssuesCompliance Issues

Works CitedWorks Cited

Kenenth Cole ArticleKenenth Cole Article WikipediaWikipedia SECSEC

Questions?Questions?