Non-US companies struggle with Sarbanes-Oxley compliance
The survey ‘Looking forward: evaluating early experiences with Sarbanes-Oxley’ of Sarbanes-Oxley project leaders from large foreign private issuers (FPIs) suggests that the experiences of companies in the US, which struggled to embed compliance in year one, risk being repeated by FPIs. There is a real danger that the excessive costs of compliance in year one will recur in following years unless companies take steps now to stand back and review the robustness of their controls and compliance structures. 44 percent of respondents viewed their Section 404 compliance efforts as an entirely discrete piece of work, unconnected to other compliance activities and processes happening within the business. Although creating ‘controls consciousness’ is considered to be a medium-to-high priority for 86 percent of those surveyed, 31 percent state that this has not to date been gauged within the company. Similarly only 19 percent of respondents say that a formal mechanism exists for knowledge transfer from their Section 404 project team to management. Nearly two thirds of respondents identify an excessive number of key controls within their organisation, which has a direct bearing on the amount of work required to document them efficiently. Respondents were split 50:50 on the question of whether they felt their processes for identifying and addressing control deficiencies were well established and working effectively. Both these factors have a very real impact on the cost of compliance in the future. Helen Nixseaman, risk assurance services partner, PricewaterhouseCoopers, said: “In the race to reach the year one compliance finishing post, businesses are not paying sufficient attention to successive years. This could mean some companies are lining-up major costs and added complexity for the future, which could be minimised or even avoided all together if they took a more structured and strategic approach from the outset. “Their goal now should not simply be compliance but cutting costs, improving controls and achieving tangible business benefits through a process of controls optimisation, which will result in the right controls at the right cost for their organisation. Only then will they create a sustainable and long-term approach to Sarbanes-Oxley compliance.” Somewhat surprisingly, less than 20 percent of the respondents felt a formal system is in place to deal with changes in risks or controls in response to changes in the business, its structures, systems or processes; this contrasts with the 83 percent who thought that this area was a medium to high priority for their organisation. The survey also highlights opportunities to ‘add value’ in the future through reducing the cost of compliance and improving the efficiency of the finance function. Companies appear not to be taking full advantage of automation to assist with the compliance process. The overwhelming majority of respondents (83 percent) say they have identified opportunities to automate processes and controls further. A significant majority (67 percent) also say that opportunities to improve processes have been identified during their Section 404 project. However only 6 percent have a process optimisation plan in place and less than one-fifth (19 percent) of respondents suggest that acting on these identified opportunities is a high priority item. Looking forward: evaluating early experiences with Sarbanes-Oxley can be ordered from the publications section of the PricewaterhouseCoopers website http://www.pwc.com/uk/publications
•Date: 4th May 2006• Region: Various • Type: Article •Topic: Operational risk |
