Monday, November 22, 2004

Sarbanes-Oxley -- compliance or excellence?

Large publicly traded companies had until November 15, 2004 to comply with the new Sarbanes-Oxley (Sarbox) rules. Among other things, these regulations require that corporate executives have meaningful internal controls over financial reporting and that they personally swear to the accuracy of their company's financial statements. For auditing purposes, companies must have a verifiable link between the original data and the quarterly or year-end numbers reported to government agencies, most especially to the Securities & Exchange Commission.

Companies have had two years to work on this issue; Sarbox was put into place in 2002 and the deadline for the most intensive regulations was extended from June until this week. And although much good and hard work has taken place, I'm wondering how many of these public firms can look their largest institutional shareholders square in the eye and swear that they have the firmest of financial controls and absolutely *all* the verifiable information that a tight ship requires. I'd suggest that, while we're certainly in a lot better shape on the financial-accountability score than we were before the Sarbox rules, there's a whole lot more that could be done. It's the difference between simply meeting the basic requirements (and in the absence of any proof to the contrary I'm assuming that all good corporate citizens have done their duty here) and doing everything that can be done with today's technology.

Consider this. Despite how intertwined Sarbox compliance must be with the IT group - and the reasons why should be obvious to any technologist reading this - the IT unit was not even involved in Sarbox planning at many organizations. A study earlier this year by Atlanta-based benchmarking firm Hackett Group found that just 12 of 22 companies surveyed had IT representation on their Sarbox steering committees. And when Gartner Group surveyed 75 public companies last fall, only 63 percent said IT was involved in Sarbox.

Sarbanes-Oxley -- compliance or excellence?

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