At the request of subscribers, Compliance Week has launched a Remediation Center, in which readers can submit questions—anonymously—to securities and accounting experts. Compliance Week's editors will review all questions and then submit them—confidentially, of course—to specialists who can address the issues. The questions and responses will then be reprinted in a future edition of Compliance Week. Below is one of the Q&As; ask your own questions by clicking here.
THE QUESTION
Anonymous —
A recent Q&A sent to Compliance Week regarding acquisitions described the one year reprieve period. What if the acquired target had in the previous year obtained SOX compliance on their own. Does the one year exemption still apply?
THE ANSWER
Henry Ristuccia, Deloitte & Touche —
The one year grace period for excluding the controls of an acquired entity from the annual 404 assessment of internal control still applies, even if the acquired entity has previously complied with Section 404 on a standalone basis, (i.e., the acquiring entity has the opportunity to take advantage of the extra time to appropriately integrate the acquired entity's systems, and make necessary modifications and improvements to the acquired entity's controls). In circumstances where after the acquisition the acquired entity is still an issuer (in terms of the applicable definition in section 10A(f) of the Securities Exchange Act of 1934), even though the acquiring entity would be able to take advantage of the one year exemption, the acquired business would be required to continue to comply with Section 404 on a standalone basis.
Note: Compliance Week's Remediation Center is an information service only. Answers to questions should not be construed to be legal guidance. Consult with your auditors, internal counsel, and external counsel on all critical compliance and governance matters.
Click here to submit an anonymous question in Compliance Week's Remediation Center.
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