Rules v Principles 301



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  • Interestingly enough, the Sarbanes-Oxley Act is not as rules based as you expect from the Americans. There was a recognition that ‘checklist auditing’ was not the way to go (in fact that was potentially a major failing in the past - if a firm completed it’s checklist it couldn’t be sued, but it may still have done a poor job) and the SOx Act has attempted to establish the principles of good Corporate Governance.
    You can see from this forum some of the issues that arise out of this departure from the norm. A lot of requests revolve around the search for the checklist or template that will solve all their problems but SOx isn’t like that. Overall, it is a good piece of legislation that really promotes/enforces a sound Corporate Governance model. There are numerous practical problems but that is another story.
    Comparing SOx to the UK Combined Code there is a HUGE overlap between the two. The main difference is that SOx has teeth :twisted:



  • Thanks for your views. Not quite sure what is meant by S-Ox has teeth? Is that because legislation is involved, whilst the Combined Code hasn’t?
    There also seems to be a certain reluctance towards complying with the Act, with respect to time, money and people costs.
    To finish off at the moment, S-Ox, like any code/Act, is there to produce better Corporate Governance. But if the CEO/CFO are unethical in their work moral, won’t they find a route around them?
    Thanks,



  • Not quite sure what is meant by S-Ox has teeth?

    I would suspect that this comment means that non-compliance = jail



  • Is that the only way to make the CFO and CEO accountable for their company accounts, to threatened them with prison and fines?



  • Is that the only way to make the CFO and CEO accountable for their company accounts, to threatened them with prison and fines?
    Probably not the ONLY way, but certainly an effective one :twisted:
    Also, given that your initial question was in comparison to UK Combined Code, you need to bear in mind that prior to the emergence of SOx the standard of Corporate Governance was (still is?) much much worse in the US compared with the UK. Putting aside the scandals of Enron, Worldcom et al, the US is a country where a majority of shareholders may still be unable to change the composition of the Board of Directors.
    That is not to say that the UK doesn’t have issues as well, just not as bad.



  • Interestingly enough, the Sarbanes-Oxley Act is not as rules based as you expect from the Americans. There was a recognition that ‘checklist auditing’ was not the way to go (in fact that was potentially a major failing in the past - if a firm completed it’s checklist it couldn’t be sued, but it may still have done a poor job) and the SOx Act has attempted to establish the principles of good Corporate Governance. ’
    Question: How has the SOX attempted to establish principles, instead of rules for checklist auditing?
    'You can see from this forum some of the issues that arise out of this departure from the norm. A lot of requests revolve around the search for the checklist or template that will solve all their problems but SOx isn’t like that. Overall, it is a good piece of legislation that really promotes/enforces a sound Corporate Governance model. There are numerous practical problems but that is another story. ’
    Question: What exactly is the nature of this depature?
    ‘Comparing SOx to the UK Combined Code there is a HUGE overlap between the two. The main difference is that SOx has teeth’
    Question: Agreed that the UK combined code by itself does not have teeth. But how would you explain for better corporate governance ( meaning no major corporate scandals) in the UK in the recent past when compared to the US?


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