The implementation of an internal control process in compliance with the requirements of the Sarbanes-Oxley Act in Brazilian companies – A case study

Abstract

The Sarbanes-Oxley Act is considered one of the most rigorous regulations of internal controls, preparation of financial reports and disclosures that have ever been imposed on American companies. It also applies to all foreign companies with depositary receipts admitted to negotiation at US stock exchanges. This paper analyzes the implementation of internal control processes in compliance with the requirements of the Sarbanes-Oxley Act in Brazilian companies. It is an exploratory investigation, carried out on the basis of a bibliographical survey, documentation and a case study in a Brazilian public company that supplies electric energy. The research techniques used to collect the primary data were interviews and direct observation. The interviewees held top positions in the accounting department and were keys to the process. It was found that in the Brazilian company in question the compliance with SOX Act was based on the model of the Committee of Sponsoring Organization of Tradeway Commission – COSO and was made easier by the progress made in Brazilian regulations related to good practices of corporate governance. Another major influence relates to the fact that the company already has a certain degree of control over its operations and a strict inspection of its activities by the board of directors. After implementing the planned processes, the company reached the stage of reliability of the internal control situated at level 3 – reliable.

Key words: internal controls, Sarbanes-Oxley Act, Committee of Sponsoring Organization of Tradeway Commission – COSO, Brazilian companies.