SOX vs JSOX vs Bill 198 vs Clerp 9: Global SOX version around the world
Everyone talks about Sarbanes-Oxley (SOX), but it’s certainly not the only law shaping governance today. Numerous countries have enacted legislation to improve governance. As with the United States, many of these countries have passed legislation in response to the outcry over corporate scandals. Although they differ by name, the laws passed by various countries have similarities, namely with regard to establishing internal controls and effecting improved financial reporting:
Japan: J-SOX:
On June 7, 2006, Japanese legislators passed the Financial Instruments and Exchange Law, part of which includes the so-called J-SOX requirements. The two main components of the J-SOX legislation are the “Evaluation of and Reporting on Internal Control for Financial Reports,” which forces management to assume responsibility for developing and operating internal controls, and the “Audit of Internal Control for Financial Reports,” in which a company’s external auditor, aside from its regular auditing duties, must conduct an audit of management’s evaluation of the effectiveness of internal control for financial reports. The J-SOX requirements took effect starting in April 2008.
Canada: Bill 198:
Bill 198, also known as CSOX, became effective on October 1, 2003. Its formal name is “Keeping the Promise for a strong Economy Act (Budget Measures), 2002.” This bill requires companies to “[create and] maintain a system of internal controls related to the effectiveness and efficiency of their operations, including financial reporting and asset control.” It also requires companies to place internal controls over their disclosure procedures.
Australia: CLERP 9 in Australia:
In 2001, Australia passed the Corporations Act, which governs corporate law. In 2004, a reform to the Corporations Act was passed, called the Corporate Law Economic Reform Program (Audit Reform & Corporate Disclosure) Act 2004 (or CLERP 9). CLERP 9 aims to make sure that business regulation is consistent with promoting a strong economy, in addition to providing a framework that helps businesses adapt to change. Three entities were created by CLERP 9: The Financial Reporting Council, the Australian Stock Exchange’s Corporate Governance Council, and the Shareholder and Investors Advisory Council.
England: Combined Code of Corporate Governance:
In England, as in many other countries, legislation has been enacted as a response to corporate scandal. Two of the most famous scandals were Polly Peck and Maxwell of the late ‘80s and early ‘90s. These scandals led to the creation of quite a few reports that dealt with many governance issues. One of these reports, the Hampel Report, led to the Combined Code of Corporate Governance (1998). Some of the areas the Combined Code covers are the structure and operations of a company’s board, its directors’ pay, accountability and audit, and the responsibilities of institutional shareholders.
India: Clause 49:
Clause 49 went into effect in December 2005. Its main goal is to improve corporate governance for all companies listed on India’s Stock Exchange. Clause 49 focuses on issues that are already implemented in many other countries, such as establishing a board of directors and appointing a managing director who reports to the board, in addition to the creation of an audit committee. A revised Clause 49 was released on October 9, 2004. This revision covers many areas, including a clarification and enhancement of the responsibilities of the board and the director and a consolidation of the roles of the audit committee as they relate to controls and financial reporting.
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