As US public companies and their auditors begin to report the results of their first review of internal controls as mandated by Section 404 of the Sarbanes-Oxley Act 2002 (Sarbox), standard setters this side of the pond begin to mull over the merits of a European equivalent. Ian Plunkett, one of our audit partners, argues that this opportunity must not be wasted, and should not simply produce a clone of Sarbox.
The frequency of corporate scandals, waning investor confidence and increasing incidents of corporate excess created the catalyst in the US for a race to produce legislation to fit the crime. The result was arguably the most seismic piece of legislation seen in a generation, stretching beyond the borders of the US, and affecting any European corporate listed in the US or wishing to access the US capital markets. The implications of Section 404 –
the testing and reporting of internal controls – in particular on business, management and auditors have been wide-ranging.
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