Corporate Governance - Internal Controls
Against a raft of financial scandals driven by fraudulent
accounting practices that involved major US corporations
such as Worldcom, Enron and Tyco, the US Senate and House of
Representatives passed the Sarbanes-Oxley Act on 30th July
2002 to restore investor confidence and underwrite the
integrity of financial information.
Sarbanes-Oxley requirements impact upon UK subsidiaries of US public companies and UK companies listed on the New York Stock Exchange thus they need to have the required documentation and controls in place.
Combined Code on Corporate Governance
The Combined Code on Corporate Governance sets out standards of good practice in relation to issues such as board composition and development, remuneration, accountability and audit and relations with shareholders.
All companies incorporated in the UK and listed on the Main Market of the London Stock Exchange are required under the Listing Rules to report on how they have applied the Combined Code in their annual report and accounts.
Section C.2 (Internal Control) of the Code has as its guiding principle the concept that the board should maintain a sound system of internal control to safeguard shareholders’ investment and company’s assets.
Internal control is important to all large organisations, public as well as private and that while the Combined Code and associated Turnbull Guidance is addressed to listed companies, it has and will continue to exert a strong influence on other sectors.
Business Benefits of Internal Control Management Systems
Businesses in the UK not directly impacted by either Sarbanes Oxley or the Combined Code requirements have identified the benefits of implementing an internal controls management system:
- Strengthened control environment
- More reliable documentation
- Less burdensome compliance with other statutory regimes
- More standardized processes for IT and other functions
- Reduced complexity of organisational processes
- Better internal controls over business relationships with other entities
- More effective use of automated and manual controls
Johnston Robertson Business Consulting is experienced in documenting business processes, devising business controls, testing controls, remediating processes and controls. Working together we can create value for the business as well as ensuring regulatory compliance for those organisations impacted by Sarbanes Oxley or the Combined Code of Corporate Governance.