SEC Shows Flexibility On Sarbanes-Oxley Internal Controls Rules

The U.S. Securities and Exchange Commission recently completed a review of how US domestic public companies have fared in their first year of compliance with Section 404 of the Sarbanes-Oxley Act. Under Section 404, the management of each company that is public in the US must report publicly on the adequacy of the company’s internal controls over financial reporting, and must have the company’s outside auditors attest to the quality of the internal controls and management’s report. Most non-US issuers that are subject to Sarbanes-Oxley have been granted an extension by the SEC and are not required to comply with Section 404 until they file their first annual report on Form 20-F for their first fiscal year ended after July 31, 2006.