A UK Sarbanes-Oxley Act?
Published: 22nd March 2021
In late 2019, Sir Donald Brydon, Chairman of the Sage Group, issued his review of the audit industry in the UK. He highlighted the need for better controls over financial reporting and suggested a ‘UK Sarbanes-Oxley Act (SOX)’ framework – with CEO’s and CFO’s of major listed UK companies giving a statement on internal controls over financial reporting (ICOFR), and reporting on any weaknesses – much like US SOX.
The Sarbanes-Oxley Act (2002) was introduced by the US Government, and came about as a direct result of the Enron/Arthur Anderson scandal. The Act imposes harsh penalties for destroying, altering or fabricating financial records.
Given the world turning on its head with the pandemic in 2020 the idea was put on hold, however a review by the Government in conjunction with businesses, audit firms and other stakeholders is due to be launched imminently.
Moving out of lockdown and into a post-Covid world, it will be more important than ever to protect the integrity of the internal controls function and whilst we are highly unlikely to see any changes in legislation this year the likelihood of it being introduced in the medium term is high.
PWC quotes five key questions that should be asked if considering a UK SOX regime:
- Scope – What should it cover?
- Application – Which companies should it apply to - the largest FTSE 350 only? Or large private companies as well?
- Standards – How deep should the framework go?
- Assurance – Should the assurance of the attestation be mandated?
- Framework – What framework should be used?
Of course any change in legislation can cause organisations significantly more work in the background of their finance teams, and across the board. In my role as Associate Client Director for Interim Recruitment at Brewster Partners, my colleagues and I partner with the most talented Interim Managers in the market who can offer both consultation and the delivery of any changes a business may have to comply with. For more information please don’t hesitate to contact me:
firstname.lastname@example.org, or 07858518478