Major study into Sarbanes-Oxley compliance published

With little more than six months to go before companies are required to begin meeting a US government imposed deadline to comply with Section 404 of the Sarbanes-Oxley Act (regarding internal audit procedures), a joint research study by Ziff Davis' CIO Insight magazine and Gartner Executive Programs (EXP), has found that 36 percent of companies have a long way to go to comply with Section 404. However, 86 percent of respondents believe their company will be fully compliant in time to meet their deadline.

The survey has also found that there will be a price to pay in meeting these regulations. Close to a third of CIOs (30 percent) say that the cost of compliance will have a significant negative impact on their companies' profitability during the next two years.

"There's no doubt that compliance with Sarbanes-Oxley will place a burden on corporations, especially smaller ones, in the short-term," said Ellen Pearlman, vice president and editor-in-chief, CIO Insight. "However, some companies recognise this is an opportunity to clean up their processes and systems and use it to their business advantage."

Large companies are the most confident that they have the IT and financial resources to make their compliance efforts go more smoothly. Medium-size businesses are spending the smallest percentage of their overall IT budget on compliance, yet they're the most likely to invest in financial reporting software to meet the deadline and the most likely to say they expect to reap significant business benefits from their compliance efforts. Meanwhile, small companies are most likely to say they won't be able to meet the compliance deadline, citing an inadequate budget as the major obstacle to compliance.

Two-thirds of IT executives surveyed said they're investing in financial technologies to help comply with Sarbanes-Oxley. Companies are most likely to spend money on document management and financial reporting and transaction software. Large and small companies are focusing on document management, while midsize businesses are most likely to use financial management software.

CIOs cite problems with data structures, difficulties ensuring adequate security and business continuity, and variations in infrastructure between business units as three of the top four obstacles to compliance. These issues are closely related. "They are the result of years of building information systems one-by-one in complex organisations, where data definitions, business rules and operating procedures are set department by department," said Marcus Blosch, vice president, Gartner EXP.

www.ziffdavis.com

•Date: 25th May 2004 •Region: N.America •Type: Article •Topic: Operational risk
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