Corporate Governance - Internal Controls
Sarbanes-Oxley (SOX)
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.