Sarbanes Oxley, or SOX, is all about establishing internal controls and procedures that are transparent and can be monitored and audited. Whether you are a public or a private board, you don’t want to find that the company has been operating in a fraudulent or illegal manner, and you want to ensure that any management behavior that could create the potential for liability is immediately visible and the board has the opportunity to step in and prevent harm.
The principals are identical for a private company and a public company. What is different is the rigor of reporting and auditing, and the risk of criminality. With private company boards, the best practice is to insist on a qualified external auditor to perform an annual financial audit, and for the board to form an audit committee with at least one independent board member participating. The audit committee needs to interact with the lead auditor independently of management, and the auditor needs to be asked to include reviewing controls and potential for fraud as a component of the audit.