Sarbanes-Oxley deadline up this week

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Sarbanes-Oxley deadline up this week

Antony Savvas

The deadline for foreign companies to be compliant with the US Sarbanes-Oxley law is up this week.

From 15 July all foreign companies capitalised at more than £75m and dealing with the US will have to report on internal accounting controls and highlight any potential flaws.

Sarbanes-Oxley (SOX) was brought into force in the US during 2002 in response to high profile financial scandals such as Enron and Worldcom. 

The legislation was imposed to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise. 

The reach of the US law is global, and it affects all European enterprises with transatlantic operations or partners.

As part of the act, section 404 requires a management assessment of internal controls within a company's annual reporting, providing a statement on the responsibility for internal controls, and demonstrating that these controls are adequate for accurate complete financial reporting. 

A large part of internal control is concerned with documenting details about the use and investment in assets. Assets are usually misrepresented in accounting audits but have a significant impact on revenue and operational expenditure, which can seriously affect both the balance sheet and income statement.

The FT recently reported that many British companies are struggling to meet the 15 July deadline and many are looking for "quick fix" solutions to make them compliant, especially with regard to the disliked section 404.


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