SEC deregistration: tactics for issuers

Author: | Published: 1 May 2005

There have been two waves of reactions to the Sarbanes-Oxley Act. After the initial shock of its adoption and its application to foreign issuers, the focus turned to reviewing and possibly enhancing disclosure procedures and other areas that brought internal enhancements with little cost. Many large multinationals already complied with or exceeded most of the new corporate governance requirements relating, for instance, to the board and audit committee.

But the second - and more serious - wave of responses relate to increased costs, both in cash terms and in terms of management time due to the requirements under Section 404 of Sarbanes-Oxley for management to report on its assessment of internal controls over financial reporting and for the auditors to attest to the management report. This has created a requirement for two audit reports: one the traditional report on financial statements, and the second an audit report on controls. The audit report on controls has in turn meant...