Is EU going to adopt Sarbanes Oxley? 377

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  • Is it known whether EU is going to adopt SOXA or part of ?

    No. It would be unprecednted for EU countries to adopt US legislation.

    Is EU going to form similar regulations of its own?

    Yes, almost certainly.

    The regulations in the EU like the Financial Service Action Plan or regulations in the UK like Combined Code,in which sense differ from SOXA? Is it because SOXA is a law,when all others are simply regulations?
    The UK Combined Code is very similar to SOX, in that it covers almost allof the same principles, and predates it by a considerable time. The difference between the two is in two main areas:

    1. enforcement - you’re probably not going to go to jail for not complying with the Combined Code
    2. documentation - SOX creates a more rigorous demand for evidencing your internal control and having it audited
      FYI the Turnball Guidance which forms part of that Code has been accepted by the PCAOB as a suitable framework for manaegment to assess internal control for SOX 404

  • Thanx a lot for the quick response and the answer.
    But as it seems from today’s Financial Times, the EU is not going to form a consolidated code for corporate governance, and as it says on the article, it is going to leave all the regulation’s responsibility to the Member States.

  • Oh well another good example of the EU knowing its priorities :roll:
    Suits me as this means that only the UK will adopt any significant Corporate Governance legislation maintaining the reputation of its capital markets.

  • Actually it doesn’t seem necessary. Even if you are a european not NYSE listed company. If you have more than 300 US Shareholders, which is somewhat difficult to avoid, you have to comply with 404.

  • What???
    I have worked with SOX for 2 years and I thought that I was an expert. I have never heard that a company with 300 shareholders has to be SOX compliant. If this is true, which I doubt, where can I find more information?

  • I’m not 100% sure on this one.%0AI know that a Company cannot delist from the US if it has 300 shareholders - that’s an SEC rule - and therefore it is extremely difficult for an overseas company to delist to avoid SOX.%0AIf have also heard the same thing that SOX applies if a Company has more than 300 US shareholders, but I don’t see how that is enforceable i.e. where would management make it’s 404 assertion if it has no US filing? The following article makes the same See the following articles for further info about the deregistering

  • Sorry Guys of causing any obstacles… :oops:
    I mixed it up. The 300 US Shareholder issue applies if you want to delist from the NYSE as a foreign listed comp.
    Sorry again…

  • Is EU going to form similar regulations of its own?

    Actually, there is a new Proposal of the Commission for a Directive on statutory audit of annual accounts and consolidated accounts, which will cover part of the topics dealt with in SOX.
    After what I have read in a couple of newspapers, they also want to change the auditing standards to ‘assimilate’ EU standards more to US ones, but I am not sure about what exactly are they going to do…

  • Accountancy Age reported that ‘there is a huge difference in the way Sarbox is interpreted and applied in the US and the way the rest of the world looks at these things’. I believe that there will be some legislation, but it will not be along the lines of the way that SOX is interpreted by the audit firms. I read yesterday that when Congress passed the SOX Act the SEC estimated the cost of implementing the regukations to be less than USD1.5 billion. However the true cost will be close to USD35bn. It seems to me that this huge cost was not anticipated by the Act, and is due to the interpretation by those who have an interest in making it as complicated as possible.%0AThis from the FT last week:%0A PwC, the biggest firm by revenue, secured an average increase in audit fees of 134 per cent during 2004 due to work on internal controls required by section 404 of the legislation, the survey found.%0AIt also found a 109 per cent increase in audit fees at KPMG, 96 per cent at Ernst and Young and 78 per cent at Deloitte. %0ALegislation to protect shareholders is a good idea, but let’s hope that Europe realises that spending more than 1% of your turnover to meet SOX (as my company is) is going to damage shareholders, employees, jobs etc. rather than protect them.

  • Those cost numbers are interesting,butbear in mind that Year 1 costs were always going to be much larger than the steady state.

  • Hi Dennis,
    You are referring to a code - UK combined code and the Turnball Guidance.
    I am searching for a paper that I have to prepare for a master course on the SOXA and Corporate Governance.
    Regarding the UK, I had identified the Committee of cardbury - 1992. Never heard/read about the mentionned code.
    Could you please add some more explanation what is the combined code, how it relates to the Cardbury best practices?
    For information, I have been implementing SOXA in the EU subsidiaries of a multinational. Very surprisingly, except for france where the new Loi de Securite Financiere has been applied from last year, no other country did show any signs of inovation, changes or remarks on the way companies are publishing their results. do you see any changes in the UK since Enron?
    I really appreciate your answer

  • The Combined Code combines the Cadbury and Turnball guidance.
    More information here:

  • Hello from Finland. :idea:
    Here’s the EU Commission Proposal for EU Directive on this matter concerned. I believe you get a good picture through the following links:
    and how this directive is proceeding in the EU:
    (Commission has sent proposal to Council, to European Parliament and to European Economic and Social Committee)

  • European companies that are not obliged to comply with Sarbanes Oxley Act, will have to do all these things required for Sarbanes Oxley, in order to comply with the European directive:
    on statutory audit of annual accounts and consolidated accounts and amending Council Directives 78/660/EEC and 83/349/EEC
    Member States shall adopt and publish before 1 January 2006 the provisions necessary to comply with this Directive’
    ‘Recent scandals such as Parmalat confirm the urgency and the need for the envisaged EU initiatives on statutory audit outlined in the May 2003 Commission Communication. The recent spate of scandals in the US and the EU have emphasized that statutory audit is an important element in ensuring the credibility and reliability of companies’ financial statements. Significant economic damage to the capital markets and the economy has resulted.’
    Looks familiar?

  • The Proposal for a Directive on Statutory Audit and Annual Accounts is in many aspects a reply to the Sarbanex Oxley Act, as for example, the requirement of registration, which was probably introduced due to the effects of the extraterritoriality of Sarbanes Oxley.
    It was quite obvious that, after Sarbanex Oxley, the Commission was going to issue a (more or less) similar piece of legislation, although there are some significant differences (as for example, the principles approach - I have already read the discussion in the other Forum about Rules vs. Principles and I still think that the approach is quite different in both regulations.).
    However, the draft is not the last one, it is still subject to amendments by the European Parliament and to the rest of the codecision procedure. Thus, the text may still change a lot…

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