Foreign private issuers with publicly-traded securities in the US breathed a sigh of relief last week with news that the US Securities and Exchange Commission (SEC) had postponed for one year – until June 2007 for companies on 31 December fiscal years – the implementation of Section 404 of the Sarbanes-Oxley Act (SOX) by foreign private issuers.
Section 404 requires company management to prepare a report on internal controls and company auditors to attest to (essentially audit) a company’s internal controls. Of all the new requirements of SOX, Section 404 is considered by US domestic and foreign companies alike, to be the most onerous. This delay gives foreign private issuers the benefit of evaluating the 404 reports of US domestic issuers – for the companies with large market capitalisations, the reports are due with the annual report to be filed by 16 March – and auditors will have gone through two attestation cycles.
