Sarbanes Oxley Deadline Looms Ominously For Underprepared Companies

15 November 2004 saw the passing of the implementation date of Section 404 of the Sarbanes Oxley Act for US accelerated filers. Compliance for non-US companies is now only 8 months away, yet a recent review by willismorris revealed that most companies are anything but ready.

(PRWEB) November 24, 2004 -- The passing of the Sarbanes Oxley Act of 2002 saw the most widereaching corporate reform act for over 70 years. Companies that are listed with the Securities and Exchange Commission (SEC)will, for years ended after 15 November 2004 (15 July 2005 for non-US companies) have to report on the strength of the internal controls and have that report audited ('Section 404'). Serious weaknesses must also be reported to investors.

wilismorris, a London based advisory practice, recently surveyed the readiness of UK companies to determine how prepared they were for Section 404. "Although the results were not entirely surprising, there are a lot of companies who are simply not ready for Section 404" explained senior partner Shaun Critten. "A large proportion of organisations are still documenting internal controls, and have not even begun to think about testing or remediating."

One alarming feature is the heavy reliance upon independent contractors to complete the work. "We were staggered by the amount of companies who had effectively delegated responsibility for compliance with the Act to contractors. Our recent Boot Camp for Section 404 teams identified that a lot of these teams are not particularly well skilled either, and it is frightening to think that a CEO or CFO's reputation (and civil liberty) is in their hands."

One interesting aspect of the Act - yet to be tested - is how investors will react to their companies reporting defects in internal controls. "We estimate that most companies will have at least one serious control breakdown" observed Critten. "Because no Section 404 report has yet been filed, investor reaction is unknown, but the first reports will be very interesting. Foreign registrants like those in the UK have the advantage of a 6 month lag behind their US counterparts - that provides a window in which they can observe the styles of Section 404 reports in the US and the reactions they attract".

But can foreign companies still meet the compliance deadlines? "Yes, but with a lot of hard work, a detailed strategy, senior manager support and ownership, quality training for quality teams, and a lot of luck" suggests Critten. "It can be done, but those lagging behind must start now".

About willismorris
willismorris does not provide statutory audit or assurance services, which means we are able to provide independent and impartial compliance services. Our Sarbanes Oxley, IFRS and Basle solutions are based around equiping the implementation teams to deliver projects effectively and efficiently. We also provide internal audit and risk management solutions.

Most of our professional staff individually have over 20 years experience in Sarbanes Oxley, Internal Audit, Business Continuity Management, Risk Management, Internal Control and Compliance. So though as an organisation we may be new, we have a long and experienced history.

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