What Nonaccelerated Filers Can Learn About Sarbanes-Oxley Compliance

By Bob Mahan

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AUGUST 2005 - The Sarbanes-Oxley Act (SOA) has been more of an operational burden on companies than expected. With the SEC extension through July 15, 2006, nonaccelerated filers have an opportunity to do SOA compliance right. Accelerated filers have found that it takes the right people, not just policies, to get the job done.

Nonaccelerated filers can learn several key lessons from the experiences of accelerated filers. One overarching lesson has emerged: Companies were grossly unprepared—and, in many cases, understaffed—to handle the additional work that SOA has created.

Most accelerated filers would agree: Don’t waste time during the one-year extension, and get the staff in place to begin the work as soon as possible. Based on reports about this year’s compliance, the estimated time for complete SOA implementation ranges from 10,000 to 80,000 hours, depending on the size of the company. In particular, compliance with section 404 will require an enormous amount of manpower, resources, and attention from the highest levels of the organization.

Another key lesson is that companies should mitigate potential weaknesses by testing internal controls themselves. Weaknesses are best corrected in advance. CPA firms typically break up assignments into phases, working with the company throughout the year to accomplish certain portions of the audit and conducting final tests at year-end. This approach can leave a company little time to conduct internal tests and make necessary modifications beforehand.

The accounting and finance departments of many public companies, spread very thin before SOA, have opted to bolster their ranks by aggressively hiring temporary or direct-hire accountants that are SOA experts. The addition of these specialists can help ensure a company is SOA-compliant without overburdening current employees. This is generally a good short-term investment for long-term gain: meet the deadline and improve the financial process with minimal time away from core business.

In addition to the risks of missing deadlines and of potential damage to a company’s reputation with shareholders, the supply of talented accountants will dwindle as the deadline approaches. With the quality and integrity of financial reporting under major scrutiny, the accountant’s supporting role has gained greater importance. The need for talented accountants cannot be underestimated and may be key to a company’s success in SOA compliance.


Bob Mahan, CPA, is managing director for Ajilon Solutions, a financial services staffing consultancy (www.ajilonsolutions.com).


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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