Financial Reporting Council

FRC consults on the use of Turnbull to comply with the U.S. Sarbanes-Oxley Act

FRC PN 95

25 October 2004

The FRC has today published for comment a draft guide to UK and Irish companies registered with the US Securities and Exchange Commission (SEC) on the use of the Turnbull report to comply with SEC requirements to report on internal controls over financial reporting.

UK and other foreign registrant companies need to comply with the SEC requirements for reporting years ending on or after 15 July 2005.

Announcing the consultation Richard Fleck, chairman of the FRC review group preparing the guide, said:

“The SEC has stated that the Turnbull report provides a suitable framework for evaluating the effectiveness of internal controls over financial reporting. This is good news for companies that are already using the Turnbull report in the UK and Ireland and wish to use it to meet these US requirements as well. I hope this guide will help them understand their obligations in the US and how Turnbull can help them to meet those obligations”.

The intention is to publish the guide in final form before the end of 2004. Comments are invited by 30 November 2004.

Notes to Editors

1. The Financial Reporting Council (FRC) is a unified, independent regulator. Its mission is to promote confidence in corporate reporting and governance. The FRC incorporates five subsidiary boards: the Accounting Standards Board, the Auditing Practices Board, the Financial Reporting Review Panel, the Accountancy Discipline and Investigation Board and the Professional Oversight Board for Accountancy.

2. As a result of section 404(a) of the US Sarbanes-Oxley Act 2002, SEC registrant companies are required to prepare a report on internal control over financial reporting. Details of how to comply are set out in SEC Rule 33-8238. Foreign registrant companies need to comply for reporting years ending on or after 15 July 2005.

3. These reports on internal controls must include, amongst other things, a statement identifying the framework used by the company’s management to evaluate the effectiveness of internal control over financial reporting. The SEC has stated that the Turnbull Report is a suitable framework.

4. The guide is being prepared by a review team, comprising Richard Fleck (chairman of the Auditing Practices Board), John Coombe (GlaxoSmithKline), and Michael Hughes (KPMG). The review team reports to the FRC Council. The purpose of the guide is to:

· provide an introduction to the requirements of Section 404(a) and SEC Rule 33-8238;

· identify those parts of the Turnbull Report that are relevant for the purposes of compliance with those requirements; and

· point companies towards other source materials that they may find useful.

5. The draft guide can be found at http://www.frc.org.uk/about/combined.cfm. Comments should be sent to 404Guide@frc.org.uk by 30 November 2004.

6. All Press enquires should be directed to: Chris Hodge on Tel: 020 7295 5815 or e-mail: c.hodge@frc.org.uk.

END