PracticeAudit12 months’ grace was Sox lifeline

12 months' grace was Sox lifeline

Survey reveals companies underprepared for regulatory demands of Sarbanes-Oxley

Companies from outside the US would have struggled to meet the internal control demands of the Sarbanes-Oxley Act, had the deadline not been extended, a new survey has shown.

Link: Flint told to avoid section 404 approach

The study by Ernst & Young showed that the 12-month grace period for non-US companies to comply with the infamous Section 404, threw many businesses a lifeline at a time when the SEC is reviewing how well the US has dealt with 404.

Of those companies originating from outside the US that fall under Sarbox rules, two-fifths expected to complete activities relating to preparation for 404 compliance just one or two months before the end of their initial compliance year, prior to the extension.

Alongside this, a similar number of companies admitted they would not be undertaking a pilot of their 404 compliance programme, leaving themselves vulnerable to problems and little or no time to resolve them.

Paul Kennard, lead partner at E&Y for Sarbanes-Oxley, said that it was ‘a big and ugly project that is bigger and uglier than you first think’. He advised that companies use the time to get value from a sustainable process rather than pause current projects.

A survey of US companies following a similar extension found that many who slowed their compliance work found it difficult to regain momentum.

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