I WRITE in response to Mark Beyer’s interesting article ‘EY leads audit market (WA Business News, April 22).
What really caught my attention was the assertion that auditing firms use the auditing business to generate “cross selling” of other services to their clients.
Surely this is the same conflict of interest that Arthur Andersen fell foul of in its dealings with the failed energy giant, Enron.
Documents were shredded in an attempt to cover up the audit, and the company was found guilty. And because of its conviction for obstruction of justice, Arthur Andersen was no longer able to perform audit work, and the ‘big five’, quickly became the ‘big four’.
What Mr Beyer did not mention is that the US Sarbanes-Oxley Act 2002 was introduced to ensure that auditing firms cannot perform non-auditing work for their clients.
Services to be banned under this legislation include consulting, internal accounting, and information system design.
Introduced to the US Senate by Senator Paul D Sarbanes (D-Md) and Republican Michael G Oxley, the bill was quickly adopted by the Bush Administration to ensure that other auditing companies did not follow in Andersen’s footsteps.
Why is this piece of legislation so important for Australian companies?
Well, the US Sarbanes-Oxley Act has far reaching implications.
Any Australian company that is listed on the US Securities and Exchange Commission (US SEC), or is a subsidiary of a US or European parent company that are SEC registrants, must also comply in full with Sarbanes-Oxley.
Information Enterprises Australia Pty Ltd