Sarbanes Oxley
The Sarbanes-Oxley Act is a reaction of the American legislation to the financial scandals of Enron, WorldCom, and others. It was enacted in January 2002, in the United States.
This law establishes rules for Corporate Governance regarding disclosure and financial reporting.
The purpose of the Act is to:
– Curb abuses by expanding corporate governance requirements;
– Implement effective and sustainable changes to regain investors’ confidence in the capital markets;
– Increase the transparency of information generated by companies and capital market institutions (investors are concerned about how their investments are managed and how they are protected)
– Discourage claims by executives that they were “unaware” of questionable activities practiced by their companies, such as:
- Holdings not recorded on the books,
- Improper revenue recognition,
- Other internal control failures.
It is aimed at US companies, but reaches publicly traded companies with shares traded on the New York Stock Exchange – NYSE.
To comply with the Sarbanes-Oxley Act, the company has been adopting measures to have greater confidence in its internal controls. It counted on the support of external consulting firm Ernst & Young, to help the functional body to map and certify all of Copel’s internal controls. As of 2006, these controls will be tested by Copel’s Contracted External Auditors, who will issue an opinion about the reliability of our systems and controls, which will be included in the content of the 20-F report.
The Sarbanes-Oxley Act assigns various responsibilities to the managers of companies that trade securities in the North American market.
Copel is one of many foreign companies with securities on the New York Stock Exchange. As such, Section 302 of the Sarbanes-Oxley Act requires the Chief Executive Officer and the Chief Financial and Investor Relations Officer to sign a certification that Copel’s quarterly and annual financial statements fairly represent the Company’s operations and financial condition.
The two Officers are responsible for the following duties:
Reviewing financial reports;
Developing internal controls capable of ensuring that the necessary information from both the Company and its subsidiaries will reach management without distortion;
Maintaining internal controls, overseeing the financial reporting process;
Evaluate the effectiveness of internal controls three months before the financial reports are due;
Present in the financial report the conclusions of the assessment of the effectiveness of internal controls.
The Sarbanes-Oxley Act requires Copel’s Chief Executive Officer and Chief Financial and Investor Relations Officer to sign a Certification (or statement) to be filed annually with the Securities and Exchange Commission (SEC) in the United States.
In this certification, pursuant to Section 404 of that Act, the Officers affirm that they are responsible for an appropriate structure of internal controls and financial procedures to generate the Company’s financial and accounting reports. The Directors further state that the internal financial controls and procedures are documented, and that the effectiveness of these controls has been personally assessed and tested by them.
The external auditors hired to review Copel’s Financial Statements must issue an annual attestation on the report of the evaluation and effectiveness of the internal controls carried out by the Executive Officers. This attestation must also be sent to the SEC for filing on an annual basis.
Section 906 of the Sarbanes-Oxley Act requires Copel’s Chief Executive Officer and Chief Financial and Investor Relations Officer to sign a certification that the information contained in the periodic financial reports filed complies with rules established by the SEC as necessary or appropriate for the protection of investors and fairly represents, in all material respects, the Company’s financial condition and results of operations, when so disclosed.
