Sarbanes Oxley Guideline
Sarbanes Oxley Guideline
Sarbanes Oxley Guideline
Guideline
The Act brought significant legislative changes to financial practice and corporate
governance regulation with the stated objective to "protect investors by improving the
accuracy and reliability of corporate disclosures made pursuant to the securities laws."
The Act applies to US public companies and their global subsidiaries and from June
2005 it will also apply to any foreign company whose shares are traded on the US stock
exchange and those who are contemplating such a listing.
The US Securities and Exchange Commission (SEC) have extended the deadline for
non US companies to comply with section 404 of the Sarbanes-Oxley Act to July 2006.
The 12-month extension will allow most UK companies a full financial year to deal with
the International Financial Reporting Standard (IFRS), the European Union's financial
services action plan and the new listing regime in the UK before full compliance with
Sarbanes-Oxley.
Under the terms of the act the CEO and CFO must certify that company accounts and
other financial statements fairly represent their firm's financial position. In addition the
company's management must state annually that they are responsible for financial
control within their company, have assessed the effectiveness of their internal systems
and processes for financial control and have confirmed their operation in practice.
Sarbanes-Oxley Act
Guideline
Sarbanes-Oxley law contains 11 titles, or sections, ranging from additional Corporate
Board responsibilities to criminal penalties. The act requires Security and Exchange
Commission (SEC) to implement rulings on requirements to comply with the new law.
The Sarbanes-Oxley Act requires that these changes be made to safeguard against
possibility of fraud through contract compliance, written policies and stronger internal
controls to match the contract compliance in line with the policies.
Agencies will need to ensure that every process that impacts upon the financial
processes of the agency is fully documented. This is likely to impact a range of
departments across the agency not just those in the financial department. There is likely
for example to a significant impact upon IT departments in an era where much
information is generated and stored electronically.
Agencies will need to ensure that all key risks are identified and that the controls they
have in place match those risks.
Agencies will need to ensure that the key controls they have in place are tested and that
any gaps they have in those controls are reported upon and closed.
an exercise in documentation
an opportunity to identify operational improvements
The act makes the chief executives and chief financial officers of companies personally
responsible for the information that is included in their financial accounts and systems of
internal financial control.
The penalties for supplying information that is knowingly false are severe:
1. 20 years imprisonment
2. $5m fine
Agencies may find that there are benefits of upgrading their financial management
systems such as: