The Israel Securities Authority, under chairman Zohar Goshen, has taken another step toward implementation of an Israeli version of the US Sarbanes-Oxley Act (SOX), with the publication of the principles for implementation. The principles include several article adapted from the US law to the Israeli market, with the objective of providing an objective assessment of the internal auditing of financial reports by public companies and disclosure by the directors and executives.
The Sarbanes-Oxley Act, officially known as the Public Company Accounting Reform and Investor Protection Act, was passed by Congress in 2002 in the wake of accounting failures by major US corporations, such as Enron and Worldcom which led to their bankruptcy and criminal proceedings.
The Securities Authority is implementing an Israeli version of SOX, or ISOX, after a committee headed by Goshen concluded that it was needed. The Securities Authority adopted the Goshen report recommendations in full, and the Knesset passed the legislation in December 2009. The regulations first apply to the financial reports for 2010.
The ISOX regulations aim to improve financial reports by Israeli public companies at three main points. The first is a statement by company CEO and CFO that the information included in the financial report is correct and credible.
The second point is an assessment by the company's management and board of directors of the effectiveness of the company's internal auditor.
The third element is the involvement of an external auditor in the audit process, who will provide an opinion about the effectiveness of the company's internal auditing procedures, and point out weaknesses and flaws. This report is made available to the company's shareholders.
The Securities Authority's the statement of principles and the press release about it did not provide details about the expected cost to companies to implement ISOX. However, market sources estimate the cost at about $50,000 for large and mid-sized companies in the first year of implementation.
In the US, first year costs were estimated at $1 million per company. Many Israeli companies, such as dual-listed firms, banks, and insurance companies, already operate according to Sarbanes-Oxley.
Published by Globes [online], Israel business news - www.globes-online.com - on June 21, 2010
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