SOX Center

Since the passage of the Public Company Account­ing Reform and Investor Protection Act of 2002 (the Sarbanes–Oxley Act), small and mid-sized public companies have struggled to comply with its onerous provisions, which created an enormous and dispro­portionate regulatory burden. Most of these costs can be attributed to Section 404, a small section of only 168 words that requires both an internal audit and an external audit of a company’s financial accounting controls.

A growing body of evidence suggests that the unin­tended consequences of Sarbanes–Oxley, especially Section 404, are harming the U.S. economy and its financial industry. However, the problems with Sec­tion 404 are caused as much by how regulators have implemented it and how outside auditors have inter­preted it. While both the Securities and Exchange Commission (SEC) and the Public Company Account­ing Oversight Board (PCAOB) have recently released proposed changes in how Section 404 is imple­mented, it is not clear that these changes will be suffi­cient to affect auditors’ overzealous behavior in an era in which their every action may be subjected retroac­tively to a lawsuit. For that reason, auditors may need some level of protection against legal liability before they feel comfortable with reducing the scope—and cost—of Section 404 audits.

The Heritage Foundation: The Sarbanes–Oxley Act: Do We Need a Regulatory or Legislative Fix?

A global survey of 800 internal audit chiefs has revealed that the pressures of regulatory compliance have compromised their ability to complete thorough audits.

The research – whose respondents were from North America ( 51%), Europe (17%), Latin America (15%), Asia-Pacific (9%), the Middle East (8%) and Africa (55%) - produced by business analysis firm ACL Services, highlighted the need for companies to continuously monitor their internal controls.

Amidst compliance deadlines, key managers were pulled in from various parts of companies to work on meeting the deadlines, causing monitoring of other areas of business to be neglected.

• The survey of companies, with revenues ranging from $500m (£261m) to over $10bn, revealed that:
• One in five audit executives felt their department’s independence was compromised by their involvement in compliance programs
• A total of 36% of organisations have adopted a continuous auditing approach across either all or within select business processes
• 39% plan to implement continuous auditing in the near future
• A shortage of skilled internal audit staff was identified as the most critical challenge to fulfilling the internal audit mandate (68 percent)
• Other major global challenges identified were the complexity of the IT environment (65%) and the lack of ownership for controls and related risk (62 percent)

President and CEO of ACL Services Harald Will, said a major concern was that the independence of internal audit was especially compromised by the manual effort of compliance.

‘Many felt technology could be applied to overcome this, but the challenge of the shortage of skilled staff also came up.

‘Whether it was a Sarbanes-Oxley deadline or something else, there is panic as the deadline looms. Staff are pulled in from other parts and then rush to complete filing and attempt to return to business as usual.

AccountancyAge:Internal audit compromised due to regulatory burdens

This time I am delighted to pronounce the new sponsor of this blog: SOX Automation, Inc. The company offered their expertise to take part at SOX-Center.com.

I accepted this grateful opportunity to strengthen the content of the blog, and I am looking forward to a productive cooperation.

About SOX Automation, Inc:

SOX Automation is a business solutions company focused on helping fast-growth public and private companies succeed and address critical business requirements related to Sarbanes-Oxley compliance and internal control risk management.

SOX Automation´s applications enable you to manage the changing complexity of internal control management in a cost-effective and sustainable manner. Our service model supports growing enterprises that need a scalable internal audit solution that can be quickly implemented, easily deployed, and customized throughout the lifecycle of your organization.

We are uniquely positioned to optimize your investment in internal control and reporting software. Achieve better insight, gain greater control and discover a smarter path to financial compliance with SOX Automation.

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