UK
14/07/2006 15:47
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Sarbanes Oxley legislation comes into effect tomorrow, dictating that all foreign firms with capital in excess of £75 million dealing with the US will be required to highlight potential flaws in internal accounting controls.
Instated in 2002 as a response to the high profile financial scandals at Enron and Worldcom, the Sarbanes Oxley act is designed to prevent fraudulent practices and accounting errors.
Section 404 of the act states that management must assess annual internal reporting procedures and provide a statement of responsibility to demonstrate that appropriate controls are in place.
The most controversial section of the act among enterprises with transatlantic business connections, section 404 is designed to ensure that company assets are not misrepresented in accounting audits, as is often the case.
Legislation controlling asset auditing could significantly influence operational expenditure and revenue, subsequently affecting stated income and balances.
There are no penalties for material weaknesses in account reports, though investor confidence could be dented by inadequate measures to remedy the situation.
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