Regulations vary a great deal around the world. However, there is a clear trend toward requiring greater transparency in financial reporting and more accountability to investors coming from the European Union’s Company Law Directives, the Sarbanes-Oxley Act in the US, and comparable initiatives in other jurisdictions.
CEOs and CFOs of listed companies are being held more accountable for the integrity of their financial statements and the effectiveness of internal controls. Directors and audit committees are taking on greater responsibility for overseeing management and for the relationship with the external auditor.
In the near future investors will see new reports from management and auditors about whether adequate internal control over financial reporting is in place. This information is important to investors because good internal control over financial reporting is one of the most effective deterrents to fraud and a key factor in preventing financial misstatements.