As Sarbanes Oxley celebrates its fourth birthday, Craig Scarr looks at the progress of non-US companies so far.

July marks the fourth anniversary of the Sarbanes Oxley Act (SOX) and yet it is still making headlines. The extradition of the “NatWest Three” and the final sentencing of Geff Skilling in October have both occurred four years after the collapse of Enron.

There has been no lack of criticism of SOX since it was adopted in 2002 in the US. American companies, the most directly concerned, are not the only organisations to find fault with this law. However, is SOX still the regulatory pariah or have views changed?

Signed into law after the financial scandals which rocked international markets at the turn of the millennium, SOX was presented by the US regulators as the best response for overcoming problems with the transparency and reliability of financial information. As the date approached for non-US companies listed on the American market to apply these regulations, Mazars wished to learn about the state of companies' preparation, the benefits expected and the main perceived drawbacks of the law. These companies were chosen in order to understand their perception of regulations which are not imposed by their country of origin, but with which they must comply.

Eighty-eight companies were interviewed in 13 countries across three continents including France, Germany, UK, Russia, India, Japan, China/Hong Kong, Mexico and Brazil. Countries were chosen based on the number of national companies listed on the American stock market.

The European, Asian and Latin American companies impacted by the law have not been caught napping. They anticipated a project perceived as complex, and today declare themselves completely or partially ready for implementation.

In the survey, 81% of companies said SOX had reinforced the effectiveness of their internal controls and 67% said it has improved the transparency of their annual report. Certainly companies see the cost of compliance as high, and criticised the excessive formalisation imposed by SOX. Some even question whether to maintain their listing on the US market.

However, the general attitude is positive: companies surveyed believe the reinforcement of internal control mandated by SOX is an appropriate response to the risks affecting the quality of financial and accounting information.