Sarbanes Oxley and Pakistan: way forward?
The jurisdiction of the much talked about Sarbanes- Oxley Act, also known as SOX, extends beyond the United States of America. There is no documented research on the possible impact of external legislations such as SOX on Pakistani businesses.
In the public interest, ACCA Pakistan has prepared a discussion paper “Sarbanes-Oxley and Pakistan: way forward?” to provide an opportunity to various stakeholders to critically analyse the extent to which the Sarbanes- Oxley requirements can possibly be adopted or not in Pakistan as best practices, with or without modifications, even when there is no obligation to comply. The key findings and recommendations of the discussion paper were formulated after interviews with key stakeholders including finance executive and partners of auditing firms.
The discussion paper concludes that the perceived benefits of SOX legislation are more effective and transparent internal controls, creation of a better audit environment and increased value for investors. The perceived barriers to implementation of the Act are the time and effort involved in implementing the internal controls it requires and unavailability of qualified human resources to implement, test and verify those controls, as required by Section 404.
Although the Act is an external legislation, a number of companies in Pakistan, mainly multinationals or local listed companies aspiring for a listing on a US Stock Exchange or a merger or acquisition with a US listed company, were partially affected by the SOX legislation. SOX-compliant companies in Pakistan are generally implementing only Section 404 of the Act in Pakistan.
Based on interviews with key stakeholders, the discussion paper recommends that the SECP in line with international best practices may consider regulating the accounting and auditing profession in Pakistan through an independent oversight board.
The discussion paper also recommends that future review of Code of Corporate Governance should realistically explore the possibility of inclusion of some of the provisions of the Sarbanes Oxley Act in the revised Code of Corporate Governance. In this context, the discussion paper recommends that management's assessment of internal controls and external auditors' verification of this assessment, in line with Section 404 of the Sarbanes-Oxley Act may be included in the revised Code of Corporate Governance.
The concept of whistle-blowing also needs to be introduced in the revised Code of Corporate Governance. Companies should be encouraged to have whistle-blowing policies and whistle blowers protection mechanisms.
Bearing in mind the problems regarding lack of suitable personnel having accounting and finance skills, crucial recommendation of this discussion paper is that all the professional accounting bodies must play a key role in nurturing and cultivating auditors equipped with modern knowledge and skills.
About ACCA Pakistan
ACCA Pakistan is a not for profit organisation established under section 42 of the Companies Ordinance 1984 and part of ACCA (the Association of Chartered Certified Accountants) the largest and fastest-growing global professional accountancy body with 296,000 students and 115,000 members in 170 countries.
We aim to offer the first choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management. ACCA works to achieve and promote the highest professional, ethical and governance standards and advance the public interest.
For Further Information please contact:
Dr. Afra Sajjad
Head of Education and Policy Development
ACCA Pakistan
Tel: 0300-8505415
For further information please contact:
Dr. Afra Sajjad