Nonaccelerated Filers Can Learn About Sarbanes-Oxley Compliance
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