Better integrity for Aussie companies in US
Better integrity for Aussie companies in US
The extension to the Sarbanes-Oxley compliance deadline will mean good news for Australian companies looking to partner and merge with US companies because they will have more vision over the financial integrity of these American companies.
The original SEC (US Securities and Exchange Commission) deadline of June 24th, 2004, was set for companies with market capitalisation over $75 million. That has now been pushed back until November 15th, 2004. This makes up for 30 percent of the public market in the US.
These companies jointly requested an extension to help the overburdened US IT and financial management community use the extra time to ensure that their processes and applications meet the compliance requirements. There is now more chance that these companies will meet the compliance requirements demanded of them, also meaning better visibility for Australian companies.
The deadline will not change for the rest of the companies though which are due to meet compliance deadlines on April 15th, 2005, under section 404.
Lane Leskela, Research Director for Gartner Incorporated in America, explained how these compliance rules are tough on US companies, but will make life a lot easier for Australian companies. "From Australia's point of view, companies which intend to do business with US companies will have more visibility over all of the accounting records because they will be made public. They will have more of an idea about all round integrity of each business and will therefore be able to make more diligent decisions.
"The audits on US companies will be very thorough, so these companies have to ensure that every piece of accounting is answered for, even from the point of the original entry of each application. No financial transaction will be overlooked or missed out. Each company will have to make sure their records management systems and risk management infrastructure is also up to scratch.
"If a company falls below the compliance requirements, they could find themselves de-listed from the stock exchange and could face legal action. So Australian companies will have a better idea of who is best to do business with."
A company that submits a wrong certification is subject to a fine of up to $1 million and imprisonment for up to ten years. If the wrong certification was submitted "wilful", the fine can be increased up to $5 million and the prison term can be increased up to twenty years.
The Sarbane-Oxley law found its impetus after the public outcry over the corruption of companies such as Enron reached boiling point.
When Enron published its third quarter results in October 2001, it revealed a large black hole that sent its share price tumbling. Enron later admitted that it had inflated its profits and filed for bankruptcy. Senior executives of Enron have been involved in criminal inquiry for fraud ever since.
The Republican party introduced the Sarbanes-Oxley law in an attempt to prevent this kind of corruption from ever happening again in America.
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