Several leading US commentators have said they expect the US Sarbanes-Oxley Act (SOX) to become the global de facto governance standard, adding that Australian legislation will inevitably be forced to tighten. CLERP9 is generally seen as Australia’s version of SOX, and is less prescriptive than its US peer, but for some this is the very problem.

“In my opinion, CLERP9 is very vague,” said one senior Australian CFO at a recent round table event. “I get a level of comfort in the fact that we comply with Sarbanes-Oxley, so therefore by default we comply with CLERP9 if CLERP9 was to align with Sarbanes-Oxley. So then again it does not bother us because we are already complying. What we are seeing in a lot of our markets is, Mexico for example, that they are basically doing the same thing as us: taking Sarbanes and implementing their own local thing. For a US company that’s a level of comfort: they comply with Sarbanes and unless these local laws are much stricter, by default they’re complying with them.”

Others, meanwhile are concerned that moving CLERP9 nearer to the US law would introduce legislation unsuited to Australian business conditions.

“The idea of CLERP9 moving towards Sarbanes-Oxley is very concerning from my point of perspective, unless of course in time Sarbanes-Oxley becomes increasingly liberal,” said another CFO of a well-known Australian company. “Whether you look at CLERP9 or other pieces of Australian legislation, it seems to be heading that way.”

Senior internal audit professionals are also predicting a shift to tighter regulation. Internal audit has been at the centre of SOX developments, and the sheer level of work required in terms of internal controls under SOX has placed huge demands on the profession. “Whether [demands on internal audit] will be there in 20 years I don’t know, but they’ll certainly be there for the next decade,” said David Lawler, vice president of the Institute of Internal Auditors in Australia. “That’s the normal way: Something horrible happens; you put in controls — you probably over control; they stay with you for a number of years; and then things slack off a bit. Then we hit another problem and off we go on the cycle again. But I think also that countries like New Zealand and Australia are looking at what is happening elsewhere in the world and I think regulations will tighten.”

Gary Anderson, managing director at Protiviti added that Australia’s ‘light touch’ regulatory system is unlikely to get lighter. “The pressure will continue,” he said. “Australia at the moment has a very light regulatory environment compared with overseas and I can’t see it getting any lighter. It’s only likely to become tougher in the long run.”

However, other observers have previously dismissed the idea that Australia needs to move to a tougher regime. “Taking into account the reality of the way our stockmarket is structured — with a relatively large amount of small players — is important,” said Mark Standen, partner at Minter Ellison. “The cost of complying with a full-blown Sarbanes Oxley approach, would not be feasible. Having established that as our baseline, our system is similar in approach to the UK. In terms of the US, our approach contains a flexibility that the US one does not. Were we to adopt the American approach we would create inefficiencies that are just not necessary in this market. “

Stuart Fagg is the Editor of Risk Management magazine, Lawyers Weekly’s sister publication.