Taxing Overseas Firms for SOX Compliance

The Sarbanes-Oxley Act, also called the Public Company Accounting Reform and Investor Protection Act of 2002 was signed into law on July 30, 2002 by President Bush. In the aftermath of Enron, Arthur Andersen, Global Crossing, and WorldCom, SOX promises greater corporate accountability and transparency. Named after Senator Paul Sarbanes and Representative Michael G. Oxley, SOX focuses on the importance of ethical behavior in corporate governance-across the United States and now?overseas.

All countries have government-required laws like Sarbanes Oxley. In the UK, it's the "Combined Code on Corporate Governance," in The Netherlands it's the "Code Tabaksblatt," Germany has a "Bilanz Reform" and a "Bilanz Kontroll Gesetz." But then, why do we need SOX overseas since we already have the required laws? It's because companies with U.S. headquarters must ensure that all foreign outposts meet federal standards. This is the major cause of concern in the management and accounting circles. According to some experts, the Sarbanes Oxley Act might have dictated convoluted rules and regulations on the U.S. businesses. While the rules are concrete ideologies that prevent accounting scandals, the constant flux in the policies confuses businesses around the globe.

SOX compliance by vendors and business partners outside the U.S. is a frightening task. The risks and complications involved in enforcing the regulations for multiple firms around the world are enormous. The U.S. firms should keep themselves abreast of the data operations and data management followed by overseas vendors. This complicates the case further as the data should be integrated in financials or entered in balance sheets. Cumbersome processing of data would step up IT-related expenses.

The global impact of SOX is tremendous. At the moment, the UK Big Four firms are feeling SOX repercussions in their consulting sectors. Big4.com -a website for global Big4 alumni- receives periodic updates on the latest news and trends at the Big Four firms. The Big Four in UK reportedly lost GBP250 million in consulting fees since 2002-a direct outcome of Sarbanes-Oxley Act. Among the Big Four firms, PricewaterhouseCoopers faced a huge decline in their consulting fees. Causes for this decline can be attributed to:

· The increased cost of compliance that usurped consulting budgets.

· Independence restrictions in Sarbanes-Oxley have restrained companies from utilizing their auditors for many consulting services.

There is an apparent role reversal in consulting fees and audit services. If consulting fees have declined, audit fees have considerably increased. A whopping 30% increase in Big Four audit fees has been observed over a period of two years. This spike does not compensate for the revenues lost for consulting. Consulting was the major strength of the Big Four in the UK. But, in the present conditions, the significant decline in consulting fees clearly demarcates the performance of the Big Four in the UK.

According to a survey by an European firm, many overseas firms with their shares listed in the U.S. were not ready to meet the deadlines of Sarbanes-Oxley. Since European firms already have specific regulations, SOX compliance is extremely difficult. Some overseas firms have been attempting to get delisted from the U.S. stock markets since SOX's inception. Foreign firms about to get listed on overseas exchanges are also resisting to get listed in the U.S. These problems would take toll on the U.S. market performance and economy. But, the exit of foreign firms from the U.S. exchanges is not that easy. As per SEC guidelines, foreign firms holding 300 or more shareholders in the U.S. cannot delist from the U.S. exchange where they trade.

In the light of these problems, the Securities and Exchange Commission-in its bid to offer sustained flexibility-started modifying rules for overseas firms listed in the U.S. The SEC would facilitate foreign firms to delist their securities that are traded on the U.S. exchanges. Modifying SEC rules to accommodate European firms would create a state of unrest among the American managements.

The SOX compliance should be an "all-encompassing" formula-that which enables governments and managements worldwide to function efficiently and in rhythm. A level headed approach to weed out this disconcert would improve the situation.

Hi. I am Neil and am a Big4.com Alumni Member. I have been writing articles since my college days. Would love to interact and share my articles with other writers.

---

IRS Offer-in-Compromise, Hype or Hope?

"Settle for Pennies on the Dollar! IRS debts settled for... Read More

Tax Records - What You Should Keep And For How Long

Many taxpayers are confused about how long they should keep... Read More

How to Maximize Your Home Business Tax Deductions for 2005

Someone once said, 'the best way to calculate your taxes... Read More

Tax Strategy - Let Washington Pay for Your Corvette, Porsche, or Air Plane

Deducting Your Auto ExpensesAuto deductions are a very complex topic.... Read More

Another Tax Loophole

Just image, you are a small manufacturing company, business has... Read More

Correspondence From The IRS ? Yikes!

It's a moment every person dreads. You pick up the... Read More

Tax Secrets - How Drew Miles Helped Me

How about a Tax Tip?As we all know Taxes are... Read More

Your IRS Tax Appeal Rights

Are you in the middle of a disagreement with the... Read More

Complaince of Tax Return in Electronic Commerce Taxation

Emerging Legal issues of Tax compliance of e-business Self-assessment system... Read More

Amending Procedural Laws for Collection of E-taxation

The electronic transaction ordinance defines the certificated copies in which... Read More

What to Do If You Can?t Pay Your Taxes

The end of tax filing extensions is quickly approaching. What... Read More

Tax Trap #5 -- Ignoring The IRS (and the 5 best ways to contact them!)

We all love to criticize the IRS, don't we? And... Read More

What Is Tax Law?

The federal tax code is complex. This complexity generally arises... Read More

IRS Statute of Limitations: Do Taxes Ever Expire?

Many Americans believe that an IRS debt is a debt... Read More

What You Need To Know About Taxes If You?re Getting Married

It may not be high on the list of wedding... Read More

Rental Property Tax Deductions

Own residential rental properties? This article discusses how income from... Read More

Business Tax Loophole: Leasing Assets To Your Corporation

While there are many equally valid reasons to incorporate, saving... Read More

What is a Federal Tax Lien?

A Federal Tax Lien (FTL) is a legal instrument that... Read More

Employment Taxes ? What Are They?

If you have employees, you are responsible for paying a... Read More

Fiscal Deity: Tax Consultant

Strategic planning throughout the year results in a minimal tax... Read More

Save Money on Taxes - Double Your Income Now With Tax Saving Tips on Deductions

Adding Your First Additional Stream of IncomeMost new wealth builders... Read More

Some Folks Pay A Lot Less Tax Than Others On Very Same Income?Did You Pay Too Much Tax In 2004?

Someone once remarked, "Next to being shot at and missed,... Read More

Tax Jokes and Quotes

Do you realize that some tax forms ask you to... Read More

About Income Taxes; Tidbits

1812The first attempt to impose an income tax on America... Read More

IRS Obtains More Than 100 Injunctions Against Tax Scheme Promoters

The IRS has obtained civil injunctions against more than 100... Read More

How to Donate Your Car to Charity and Get Tax Deduction

Donating your used car to charity is a win-win situation;... Read More

How to Reduce the Estate Tax Using the A-B Revocable Living Trust

In a past article I relayed the plight of the... Read More

Early Distributions From Retirement Plans

An early distribution from an Individual Retirement Arrangement (IRA) or... Read More

E-commerce Taxation

The means and types of businesses have transformed with advent... Read More

Rearrange Your Affairs For Maximum Tax Savings

One way to maximize your business profits is by reducing... Read More

Tax Tips to Save Money on Taxes - Get the Corporate Kick and Save Loads of Money

Why a Corporation Helps Save You TaxesThe Tax Rates (Notice... Read More

Tax Audits: What Signs Make You More Likely to be Audited by the IRS?

It's a major fear for most Americans: A notice from... Read More

Corporations Failing To Claim AMT Exemption Overpay Taxes By $11,000

Does your incorporated business pay alternative minimum tax ["AMT]? If... Read More