Hewitt tells US to lay off UK firms
Trade and industry secretary Patricia Hewitt is to tell her opposite number in Washington to lay off UK audit firms and reform parts of the now notorious Sarbanes-Oxley Act on corporate governance.
Link: DTI to scrutinise the Accountancy Foundation
The move, expected in a trans-Atlantic conversation with US commerce secretary Don Evans this week, will come as part of a determined offensive to win an exemption for UK auditors from extra-territorial elements in the legislation.
Competition minister Melanie Johnson is also due to hold talks today in Brussels with Harvey Pitt, chairman of US financial watchdog the Securities and Exchange Commission, where she is expected to deliver a similar message.
The DTI is understood to be highly critical of the lack of consultation outside the US over the act and will ask Washington to consult more with the UK government and business community.
Growing concerns among UK audit firms has prompted the DTI into action with the strong belief that there is still a ‘strong case’ for getting an exemption for UK firms because they are already subject to very strict British corporate governance procedures.
The department said it wants the US to recognise that the UK already has a tough regime and that it’s responding to the corporate scandals that shook corporate America.
Section 106 of Sarbanes-Oxley compels foreign audit firms to give working papers to US authorities, should they be demanded, and also makes them subject to US court rulings. But much of this section has still not been implemented, leaving a crucial opening for the DTI to lobby the US government for change.
As if to reiterate how seriously the government is taking the collapse in confidence, Hewitt published a consultation document on Tuesday detailing proposals for the reform of accountancy regulation. Taking a swipe at the US, Hewitt said: ‘All the issues raised in a considered and measured way rather than rushing in regulation that might prove unworkable or have unintended side effects’.
Three main issues are up for consideration: the Foundation’s structure and funding; whether it should focus on just auditors or the industry as a whole; and whether there should be stronger oversight or intervention.