For a long period, organisations operating in the UK were regulated by various legislative bodies and regulations. Recently, however, major scandals have attracted a lot of attention, such as the BHS audit investigation, Carillion, and Pâtisserie Valerie. These and other stories have emphasised the inefficiency of the current state of affairs, the low quality of audit activities, and the lack of clear reporting.
So the British government decided to take the initiative and implemented a special corporate governance reform. This reform is very similar to the US Sarbanes-Oxley Act (SOX), which was implemented in America in 2002. However, the main question still remains open for many: “What is SOX Compliance in the UK?“.
What should you know about SOX compliance in the UK?
At its core, UK SOX is similar to its original version, US SOX. Back in 2021, the Department of Business, Energy and Industrial Strategy (BEIS) published a special document entitled “Restoring trust in audit and corporate governance”, which was intended to demonstrate to the public ideas for the necessary changes and reforms.
The idea behind the UK SOX reform is to protect auctioneers from possible fraud in financial reporting. In other words, the primary function of this law is regulatory and supervisory. In particular, Reuters reported that “The ministry wants to introduce a UK version of the Sarbanes-Oxley regime, a U.S. law introduced to crack down on accounting fraud after the Enron collapse”.
Therefore, the companies will have to agree on further actions at a separate meeting or in a virtual boardroom to make their activities more transparent and open to the auction company. Moreover, those organisations that have previously used board management software will be able to easily integrate the reform using the technical capabilities of the portal.
Currently, the issue of implementing the UK SOX reform has not yet been finalised. Society also does not know when the reforms will come into force, and organisations are anxiously awaiting a definite list of regulatory requirements to be met.
Scope and key changes to be implemented by UK SOX
The main change that the UK SOX reform aims to achieve is to provide stronger control over audits, increase the level of transparency of organisations’ activities for shareholders and other partners, regularly submit accurate reporting documentation, and prevent fraudulent manipulations.
In particular, the PwC portal notes in its material that “Strengthening internal controls has significant benefits for organisations, helping to combat fraud and improve the quality of corporate reporting and governance.” For this purpose, the government will create a special regulatory body for corporate governance, namely the Audit, Reporting and Governance Authority (ARGA), which will replace the former Financial Reporting Council (FRC).
The introduction of the UK SOX reform may draw the most attention to the following aspects:
- Increased reliability of the company’s financial statements;
- Detection and prevention of fraud due to the expanded control system;
- Ensuring greater protection of shareholder resources;
- Establishing an open corporate culture based on trust, dignity, and responsibility.
Thus, not only financial companies or stock exchanges, but also large private businesses will be subject to the possible reform. However, those organisations that are already familiar with the concept of a board portal and know the benefits of a paperless meeting solution will have an easier time adapting to the upcoming UK SOX regulations. After all, such technical solutions allow for transparent documentation, open provision of necessary information to users, and can guarantee a high level of data security due to the technical capabilities of the software.
Looking ahead: How can companies prepare for 2024?
Although the reform still has no clearly defined status as to its adoption, business owners should not postpone the preparation and planning of their activities until later, but should start now. And it is worthwhile to start planning for the next year so that company executives can more clearly assess their capabilities and start planning for the next year:
- Carefully maintain financial control and all settlement processes (i.e., monitor the receipts and expenditures of company finances, and keep accurate financial statements);
- Regular internal audits and inspections;
- Competent distribution of responsibilities among all employees;
- Make transparency and honesty your corporate values;
- Competent and open communication with shareholders, partners, and the public.
It’s also important to ensure that all documentation and financial reports are securely protected. This is where specialised online board meeting software comes in handy again. It allows you to hold all meetings online with direct access to employees either by a special key or through a special invitation. On top of that, board portal software can provide customised reports and statistics after each meeting.