Brink's Modern Internal Auditing

CHAPTER 33 ISO and Worldwide Internal Audit Standards

As we have summarized in earlier chapters, the Sarbanes-Oxley Act (SOx) is a U.S. law that was enacted in response to a spate of financial frauds in U.S. corporations at the turn of this century. Although U.S corporations such as Enron and WorldCom captured much of the attention, a non-U.S. corporation was involved too: Tyco, with its headquarters in Bermuda. Tyco, whose CEO was involved in flagrant financial excesses, was really a U.S. corporation that had recently transferred its corporate registration to Bermuda for tax purposes. At the time, journalists and politicians elsewhere in the world and particularly in European Union countries tut-tutted that this financial fraud was a U.S. problem. They particularly resented the SEC’s plans to impose SOx rules on international corporations whose securities were registered in U.S. exchanges.

It did not take long to realize that the United States was not alone in regard to financial fraud. In February 2003, the major Dutch food distributor Royal Ahold admitted an “accounting irregularity” of some $500 million. Ahold had operations throughout the world and was found to have misstated its accounting and financial records to show better results. Also, a Sri Lankan–born billionaire businessman, Sanjay Kumar, former chief of a California-based company called Computer Associates International, was sentenced to 12 years in prison and fined $8 million for securities fraud and obstruction ...