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A slowdown in mergers and acquisitions on the part of publicly held companies might be an unintended consequence of the Sarbenes-Oxley accounting reform legislation, suggested Ernest Lorimer, a partner in the Stamford, Conn., law firm Finn Dixon & Herling.
The reason, he said, is the combining of personal accountability provisions of Sarbenes-Oxley with previously existing securities law.
The recent promulgation of rides to implement Sarbenes-Oxley by the Securities and Exchange Commission has brought this issue to the fore, Lorimer said. "If you are buying a business, you did not design their internal accounting controls but now you are responsible for them."
Section 302 of Sarbenes-Oxley requires both the chief executive officer and the chief financial officer of a public company to personally certify the accuracy and fairness of their company's financial statements and the adequacy or internal accounting controls.
Previously existing securities law requires public companies to include the financial results of certain acquired entities into their public disclosure documents and to include the results of the acquired entities in its own...