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Ten Years Later: Lessons From Sarbanes-Oxley

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Ten Years Later: Lessons From Sarbanes-Oxley

by Jonathan Collins, 09 August 2012
topics:
Law and Compliance
tags:
internal controls Sarbanes-Oxley
We have just marked the 10-year anniversary of the Sarbanes-Oxley Act, which was enacted July 29, 2002. Most companies in the US and their subsidiaries in Asia, as well as Asian companies that have issued securities in the US, would have gone through at least one major rationalization effort to reduce the number of controls and understand the true cost of compliance.  
 
There are important rationalization lessons that have been learned during the past 10 years; namely:
  • rationalization isn’t a onetime event
  • the involvement of all stakeholders is required
  • companies have to be diligent in measuring their progress around SOX
 
Rationalization is an ongoing effort
Rationalizing your controls isn’t a one-time event.  For global companies with ongoing changes, it’s an ongoing, all-the-time proposition.  
 
Businesses change and growth in one market may be balanced with a retraction in another market. Annually, you should be revisiting your scoping based on what is material. This will guide you in which markets need more attention due to growth and which markets need less attention due to contraction.  
 
For those markets that are getting smaller, it may be an opportunity to rely on more entity- level controls and do less detailed testing of process controls. For markets that are growing, use this as a time to revisit documentation and the control framework.  
 
It could be that controls that worked for a $10 million segment no longer meet your control objectives if the segment is now $100 million. 
 
It takes a nation
As you look at your control framework, use this as a time to include all stakeholders.  
 
Invite your external auditors to the table to gain consensus that the key controls you are identifying are the same key controls they are looking at. If Internal Audit provides testing services, include those parties as they will be able to provide a ground eye view of opportunity areas. 
 
Representatives from Information Technology should be at the table as they can provide insight into controls that can automated and alignment to ongoing and planned IT initiatives. 
 
Of course, the control owners need to drive the discussion as they have ultimate accountability for the control environment. 
 
You can only manage what you measure
Understanding your true cost of compliance is a fundamental aspect of rationalizing your control environment.  
 
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