[The impact of The Sarbanes-Oxley Act on Public Listed companies in the UK]

by

Acknowledgement

I would take this opportunity to express gratitude my study supervisor, family and associates for their support and guidance without which this research would not have been possible.

DECLARATION

I, [type your full first names and last name here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for learned written test in the direction of any qualification. Furthermore, it comprises my own attitudes and not inevitably those of the University.

Signed __________________ Date _________________

Chapter 1: Introduction

Background of the Study

The Sarbanes-Oxley Act was implemented as a direct result of serious financial misconduct by business leaders in the late 1990s and early 2000s that hurt both large and small investors. In retrospect, much of the abuse that occurred was simply forgetting or ignoring basic ethics and common sense. So to who does Sarbanes-Oxley apply? Any company whose securities are registered are required to file reports under Section 15(d) of the Exchange Act (www.zrconsultants.co.uk). In essence, this means any publicly swapped company. The key to this report documentation is that the Act does not provide a definition of 'relevant' or 'material' and each company must determine what is relevant or appropriate material based on each circumstance.

The Sarbanes-Oxley Act has mandated that companies make significant changes in corporate governance, requiring more proactive audit committees and holding senior management more responsible for the information presented in a company's financial statements. The Act has changed the role of the registered public accounting firm as well (www.eaca.be). Firms now report directly to the audit committees of their clients and are subject to the expectations of their new government regulator, the PCAOB. Many critics of the Act contend that the U.S. Congress has attempted to legislate ethics into the corporate workplace. In addition, there are concerns that implementation of the Act gives U.S. public companies inherent disadvantage in raising capital in international markets, as no other country has such significant laws and regulations regarding financial reporting and corporate governance (www.sarbanesoxleyuk.co.uk). Will the changes brought on by the Act improve the integrity of financial reporting, the quality of audits of financial statements, and the behavior of corporate management and directors? Will U.S. public companies experience difficulty in their attempts to raise capital? Only the passage of time will permit a determination of the effectiveness of this far-reaching legislation.

An important element of Sarbanes-Oxley will be how it affects businesses not now under its umbrella, namely, smaller and medium-sized businesses and supplier organizations that are not publicly held, yet seriously seeking to grow. These companies typically are growing large or fast enough to be interested in equity injections that require outside audits, yet remain too small to afford the fees of large accounting or consulting firms (www.continuitycentral.com). Institutional investors are themselves required to provide relevant, accurate and timely disclosures as a prerequisite for financing third party investments. Consequently, the Sarbanes-Oxley requirements are becoming relevant to second tier companies' ability ...