I have been exposed to yet another example of differences between how UK accountants function and how Canadian/American accountants function – in the corporate world.

I know I have harped on this a few times – I think – but in North America there’s this funny little law called “Sarbannes-Oxley” – it was put in place after the fiasco that is Enron & WorldCom; a fiasco so large that it shook the investment community and destroyed one of the big audit firms – Arthur Anderson. At heart SOx reminds us all what we studied in “accounting school” – the segregation of duties.

In my funny world of being a Senior Accountant I cannot raise a journal entry unless I have enough evidence – this is generally called either “backup” or “working papers”. Such backup is used to support the justification of putting through a journal entry. So if I have had a verbal conversation with someone, because it was verbal I cannot use it as backup for a journal. So I tend to email the individual asking them to confirm our conversation, so I can use that email as backup.

Last week, whilst completing my balance sheet reconciliations I noted that there is a balance for some investment services which has never been moved to the Income Statement. This should have been moved, so I spoke to our Treasury Manager to confirm that this particular transaction was indeed an investment service charge and where it should be charged to. I then promptly emailed him asking for a confirmation of our conversation. I guess being a foreigner I am not used to the way British accountants function – but I was told off.

I was told that I cannot add layers of bureaucracy, and asking for written confirmation for a verbal discussion is ridiculous.

This is what gets me. I am very mindful of the fact that my transactions could be audited at any given point, so I like to “cover my ass” so that I have the necessary backup in case an auditor asks me why I put through a journal 9-13 months ago. Trying to ask someone else nearly a year after the fact to confirm the conversation is just silly – no one will remember, unless there is something there to trigger the memory – like an email exchange.

Love it or hate it, Sarbannes-Oxley has some very strong benefits. One of those is strict controls, so that stakeholders have confidence in the figures. That the figures are not just all hokum.

I did a CPD on Internal Controls a few months ago, and there are guidelines in the UK which approximate what SOx is trying to achieve. But they are voluntary, and the vast majority of British companies would rather not. They would rather not because it’s too painful and what’s the point.

What does this teach me? There’s no way in hell that I want to invest in a British company, unless they subject themselves to vigorous audit controls.