The Sarbanes-Oxley Act, introduced into law in 2002 by President George W. Bush, was the US government's response to an increasing number of corporate fraud scandals involving high-level executives of well-known companies, most notably Worldcom and Enron. Its introduction was also an attempt to restore public trust, but more importantly, to protect the financial assets of investors, many of whom lost vast sums of money in the wake of the misappropriation of corporate funds. The Act sets new standards for corporate boards and accountability standards and penalties for corporate management.
All companies listed on the New York Stock Exchange (NYSE) are bound by the Act; this includes South-African based AngloGold Ashanti, which listed on the NYSE in 1998, and which is classified as a foreign private issuer.
Consisting of 11 sections, the focus is primarily on the accounting profession, relating as it does to corporate governance, financial disclosure and the practice of public accounting within companies. In tightening financial controls, a Public Company Accounting Oversight Board (PCAOB) was established in terms of Sarbanes-Oxley to oversee and regulate a public company's auditors. The PCAOB looks at corporate responsibility and focuses on stricter regulations around the company's Audit Committee, financial reporting, and the improper influence over the external auditors.
Hester Hickey, group internal audit manager at AngloGold Ashanti, explains that when initiating compliance with Sarbanes-Oxley in early 2003, the company first analysed the requirements of the Act and reviewed current practices. AngloGold Ashanti was already compliant with a number of sections of the Act, but it was eager to ensure full compliance as soon as possible.
One of the key requirements with which AngloGold Ashanti was able to comply immediately was certification by the chief executive officer and chief financial officer of the Annual Report 2003, confirming its accuracy and reliability and testifying to the absence of fraud, errors or misstatements. Another requirement required of AngloGold Ashanti under Sarbanes-Oxley regulations was moving the responsibility for auditors from management to the audit and corporate governance committee, which comprises independent non-executive directors.
The most onerous requirement of the Act currently for AngloGold Ashanti is the one pertaining to Section 404 (Sarbanes-Oxley 404), which looks at the evaluation of internal controls with regard to financial reporting. A high level of detail is required in this section of the Act, to which each and every AngloGold Ashanti operation is subject. A Sarbanes-Oxley 404 Task Team was established at the beginning of 2004 to guide the process. Regional steering committees were established feeding into a corporate office steering committee, which reports directly to the audit and corporate governance committee. The corporate office steering committee meets monthly to review progress of the initial methodology documents which
outline four components to the delivery of internal controls - design, implementation, testing and maintenance. Key activities and deliverables have been identified in each area to ensure full compliance with Sarbanes-Oxley. The task team is currently in the second phase - implementation - which includes documentation of controls at all of the operations and evaluation thereof, to reveal any deficiencies in control mechanisms. Full implementation is expected to be complete by the end of 2005. Last but not least is maintenance, a critical aspect in ensuring continuation of internal controls once their effectiveness has been established.
Sarbanes-Oxley challenges going forward include ongoing compliance with current and new requirements of the law; ensuring that documentation processes are completed within given time frames; and timeous remediation where it is required.