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Compliance : Sarbanes Oxley : Auditing : Management
People - As Important As Policy
By
Bob Mahan
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Bob Mahan
Ajilon Professional Staffing
Ajilon Professional Staffing
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When Sarbanes-Oxley (SOX) passed in July 2002, it was difficult to gauge what its long-term impact on day-to-day business would be. In the subsequent confusion regarding the requirements of the law, one constant has emerged: most companies were grossly unprepared and - in many cases - understaffed to comply with the new regulations. In fact, compliance became so daunting, companies requested en mass for an extension from the SEC to comply, which they received.
Over the past few years, more than 5,000 large- and medium-sized public companies grappled with the significant impact this regulation has had on resources. As an advisor to many companies regarding their SOX staffing issues, we have examined some of the effects of SOX and the type of people companies should look for in order to handle the extra work this law has created. As a result, we've been able to capture some key insights companies can follow as they continue to refine their staffing strategies to comply with SOX.
SOX Regulations - Not just for public companies anymore
It is important to remember that while Sarbanes-Oxley pertains only to publicly traded companies, its impact on private companies cannot be denied. Many of these private companies are trying to keep up with the times by incorporating SOX regulations on their own. The benefit for private companies is, of course, that they are not bound by the same deadlines as public companies and can therefore implement changes at their own pace. On the surface, this effort to adhere to SOX may seem strange, but if you factor in that some of these companies might like to go public in the future or sell to a public company, the due diligence involved will overlap with SOX requirements.
Certainly, more and more private companies will likely implement SOX regulations as private investors, lenders and insurance companies start to look for the same standards as in public companies. By default, the SOX requirements are becoming a "best practice" for any company who may want to offer shares in the future or sell.
Do you have accountable accountants?
Section 404 refers to internal controls, and compliance with this section has increased the need for timely and accurate financial reporting. As a result, the accounting departments of many public companies are feeling the effects of SOX more than others. Many of these departments are already spread very thin and opting to bolster their ranks with aggressive temporary or direct-hire accountants who are SOX experts. The addition of these specialists can help ensure that a company is in compliance with SOX without overburdening current employees who are already dealing with their regular day-to-day business affairs.
Companies in need of accounting professionals would do well to staff up now, as delaying any longer may result in a game of catch-up. As deadlines loom, the supply of talented accountants dwindles. With the emphasis that is currently being placed on reliable financial reporting, the normally supportive role of the accountant has become one of increased importance. In short, the need for solid accounting talent cannot be underestimated and may, in fact, be key to a company's compliance with SOX regulations.
Expanding role of the auditor
As scrutiny of companies' accounting practices continues to receive increased attention, accountants aren't the only ones whose typically behind-the-scenes roles will receive more of the spotlight. Auditors, who used to work "under the radar," will find themselves in a position to make a difference within the organization. Whereas auditors used to be upstaged in board meetings by new marketing strategies or innovative technologies, the changes SOX has created in the reporting structure provide the auditor with a much higher visibility.
Historically, the auditor has had to walk a very fine line and worry about jeopardizing their business relationship if they disagreed and spoke out too often. Thanks to SOX, however, the auditor will be encouraged to take a more active role and voice his or her opinion. Whether internal or external, auditors are now in a position to command attention, as the significance of their work and professional opinions takes on a new relevance. The role of the auditor has been given new life, and it is now crucial that companies rely on top auditing talent as they implement and adhere to SOX.
People - as important as policy
In the delicate balance of internal controls, the roles of the accountant and auditor are intrinsically linked. And, while SOX was designed to save investors' money, implementing the changes required by the law has cost many companies a tremendous amount as they rush to comply with the regulations on schedule. That said, perhaps the most significant impact on companies will be in terms of the overall structure of their staff. The emphasis on internal controls has increased the need for talented, reliable accountants who can ensure that the company remains in compliance with SOX while remaining solvent. In other words, people, not just policy, will be a company's best tool for surviving and thriving in the post-SOX world.
In conclusion, the role of accountants and auditors has been magnified by the close scrutiny companies will endure moving forward as a result of SOX. This type of talent, strong auditors and SOX specialists will continue to be a critical component to virtually every company's staffing strategy -- not just public companies. In order to maintain a dedicated, hard-working staff to ensure accuracy and compliance means companies need to more carefully select these types of staff as well as do their best to retain them. Attracting the best talent in this category and retention will be an on-going issue as demand for these professionals continues to increase. Companies who take to heart the guidelines above will be one step ahead of the rest.
Bob Mahan
Ajilon Professional Staffing
Ajilon Professional Staffing
Bob Mahan is managing director of Ajilon Professional Staffing's financial staffing consultancy. Prior to joining the company, he was the group financial director for Liz Claiborne's Special Markets and Accessories Divisions. He began his career at PricewaterhouseCoopers, where he received his CPA and worked for three years on the audit staff. Bob is a Pace University alumnus and graduated Cum Laude with a bachelor's degree in Business Administration.
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