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Spotlight on SOX Compliance By: Sandi Smith, CPA Product: N/A Tip Category: Best Practices

Situation

Compliance with Sarbanes Oxley continues to challenge organizations, as we can see from the constant stream of accounting restatements, delayed filings, and even courtroom activity.

Editor's Note: Sarbanes-Oxley legislation, enacted in the wake of corporate scandals, was originally meant to apply only to publicly traded corporations. However, more and more pressures are on businesses to comply with Sarbanes Oxley (sometimes called Sarbox or SOX for short) as a kind of defacto standard best practice. The pressures come from lenders, vendors, and other business partners. While many small businesses are free from such pressures, they continue to press down into the lower rungs of business. Compliance with the provision is also found more frequently at nonprofit corporations, eager to demonstrate to donors and other stakeholders the quality of their governance.

Project Management vs. Organizational Change

Most organizations that treated SOX compliance as a project in the first year overspent their budgets and missed their deadlines. Some SOX consultants say that SOX compliance should not be treated or implemented as a project at all. Instead, it should become an integral part of the organization.

Response

In preparing for organizational change, it is helpful to review the key aspects of SOX compliance. They include:

• Creating accountability throughout the entire organization.*
• Designing an efficient operating structure that includes processes, controls, and standardized documentation.
• Automating technology to ensure cost-effective operations.
• Incorporating changes into the compliance process painlessly on an ongoing basis.
• Performing tests and collecting metrics to ensure compliance is effective.

If your organization or your client organization insists on seeing SOX compliance as a project, help decision makers understand that it is a very different kind of project. At best, SOX compliance is an ongoing project that is best handled by embedding the compliance processes into the existing framework of the organization. (See also Five Tips toward Smoother Accounting Project Management.)

* Note: Some organizations will find that hiring a Chief Internal Controls Officer or a Chief Governance Officer is the best way to implement compliance. But don't stop there: Make every job description include responsibility toward compliance.

Sandi Smith, CPA, is a freelance writer and professional speaker located in Dallas, TX. Her web site is http://www.sandismith.com.

Last Updated: 05/03/2007

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