Torrey Carlblom

SOX Euphoria or the Impossible Dream?

Containing costs while enhancing internal control.

May 1, 2008
Sponsored by Intelli-Solve LLC
by Torrey Carlblom

The number one concern expressed about Sarbanes-Oxley since the signing of the Act in 2002 has been the time and cost associated with compliance. Though the requirements seem clear enough, keeping projects in scope and on budget continues to be a daunting challenge. Whether you’re a company in your third year of compliance or one just beginning, the following are some “tips from the trenches” — advice from individuals who’ve been involved with SOX compliance from the very beginning:

First, ensure that SOX compliance is a top priority for senior management. Upper management support is critical to successful completion of any phase of the SOX initiative. But reaping the operating efficiencies that can be attained requires that SOX compliance initiatives are a priority from top management down. This priority must be seen at all levels, particularly with resources allocations and in providing time for business users to a) meet with documentation and testing personnel and b) provide necessary materials. SOX TIP: Ensure that the project Steering Committee is comprised of the right people in the right positions to maintain project priority.

READER NOTE: Visit Intelli-Solve LLC for more SOX TIPS.

Next, keep it simple. Remember that the purpose of the SOX initiative is to certify the adequacy of disclosure controls and procedures and internal control over financial reporting. SOX TIP: Keep control documentation simple enough that someone coming in as the new control owner could review the materials and readily understand how to perform the control.

Third, when documenting and testing controls, stay at the control level. Avoid the ever-present danger of “getting into the weeds.” Most companies, when beginning or expanding a SOX project, tend to document in too much detail. Understanding desk procedure is important to the project only as it enhances understanding of how controls are performed and how we know they work. SOX TIP: Emphasize using the control matrix to keep your documentation and testing control-focused.

Last, adopt a standard, template approach to documentation, testing and reporting. Developing templates around the principles of a) staying at the control level and b) documenting at the control level helps establish and maintain necessary project focus. This enhances effective communication and fosters a common understanding of internal controls from control owners to process owners, Steering Committee members, senior management and both internal and external audit personnel. SOX TIP: Whether working with or independent from a SOX consulting firm, adopt a standard approach with template documents to reduce time and cost while supporting sound certification.

While SOX compliance is often viewed as a regulatory headache at its outset, companies are realizing the value to the company by keeping things simple, maintaining project focus and ensuring effective communication between all affected parties.

For more information, visit Intelli-Solve LLC.

Torrey Carlblom is the President/CEO of Intelli-Solve LLC and has extensive background with business management, corporate finance and financial systems. He has been helping companies strengthen and certify their financial and IT control environments since the signing of the Sarbanes-Oxley Act.