As a result of the infamous Enron and WorldCom scandals, the U.S. reacted with strict guidelines to re-establish confidence in the financial market. Commonly referred to as the Sarbanes-Oxley Act, or “SOX,” the Public Company Accounting Reform and Investor Protection Act of 2002 was implemented to protect shareholders and the general public from fraud and general accounting errors. SOX has come to be considered part of the total fabric driving reliable financial reporting, impacted by securities laws and regulatory oversight, exchange listing requirements, accepted accounting principles, effective auditing standards, accounting firm oversight, effective standards for audit committees of boards, and independence requirements for directors and auditors, among other things.
Of course, the U.S. markets do not exist in a vacuum and the effects of the events above were seen and felt all over the world. In response, several countries enacted their own version of the U.S. Sarbanes-Oxley Act. In our effort to keep our members informed and armed with a larger view of audit standards, our “Sarbanes-Oxley Section 404 Comparison Guide” is available with clear and concise side-by-side comparisons of U.S. Sarbanes-Oxley (SOX) Section 404 with C-SOX in Canada and J-SOX in Japan.
While the U.S. sought to “clean house” and restore confidence at home, many countries took a deliberate “watch and see” approach to learn and compare. Because of this, one primary difference is the timeline. In the U.S., the filing deadline for U.S. compliance was mid-November, 2004 for companies with a market capitalization of more than $75 million, while in Canada the deadline for full compliance was 2008 and in Japan the Financial Instruments and Exchange Act was implemented in 2007.
It’s important to note that Japan’s regulatory implantation was also in response to scandals in their own markets, including Seibu Railway, Oct. 2004, Kanebo, Sep. 2005, and Livedoor, Jan. 2006. Japan’s version of SOX is incorporated in its Financial Instruments and Exchange (FIE) Act enacted in 2006. In applying this law, the Subcommittee on Internal Controls of the Business Accounting Council issued its “Evaluation and Auditing Standards for Internal Control for Financial Reports” and “Implementation Standards,” both of which were finalized in 2007. The Law and Standards are collectively referred to as Japanese SOX or J-SOX, and apply to companies listed on Japanese exchanges.
For specific information on the similarities and differences in SOX, C-SOX and J-SOX, log in to KnowledgeLeader and check out the “Sarbanes-Oxley Section 404 Comparison Guide”. If you aren’t currently a member, you can sign up for a completely free, no obligation 30-day trial and gain access to this and hundreds of other tools, templates and informative articles in Internal Audit, Risk Management and Compliance.
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