Can it really be true? Is it finally time for non-accelerated filers to comply with the Sarbanes-Oxley Act?
So far, there has been no further extension for SOX from the SEC or Congress and the current bill from Senator Dodd doesn’t even mention an exemption from the SOX Act. There is still a chance for amendments to be made to the current Senate bill but will that happen before the June 2010 deadline, it’s doubtful. Keep a close eye on the Dodd bill for updates, which is summarized on Senator Dodd’s website.
To be honest, I think every company should employ good internal controls.
I have seen the affects of well controlled companies getting rewarded, starting early in my career. I worked during college at a VC backed start-up company and in typical fashion I wore many hats – receptionist, office manager, accountant, and executive assistant. I distinctly remember the breaking point when the company grew big enough to require more structure and my role focused on accounting only. A CFO was hired and I was trained by him to implement controls. Oh, the drama of telling people they needed approval for purchases. Gone were the days of yelling across the hall for verbal approval of a $10,000 check (works fine when there are 10 employees, not so good when there are 100 employees). Adding these procedures while the company was growing was not a huge additional expense and controls quickly became embedded in the culture of the company and now the company was ready for an exit – be it IPO or acquisition. In the end, the company was acquired by a Fortune 500 company. Would this have happened without the strong control environment—maybe. But was the acquisition process easier, was the value of the company higher, was the buyer more confident—definitely!
So what’s all the fuss about Sarbanes-Oxley, good controls have been around for a long time? The SOX requirement to document and test the controls takes time, and auditor review of those controls causes companies big headaches, the end result is increased costs. But believe it or not, control documentation can be done efficiently. Start early with control optimization and use the right people and the right compliance tool, and the process is painless! Experience really counts when documenting controls since experts are familiar with 1) focusing on the risk of misstatement; 2) documenting controls succinctly; 3) using a tool for testing, workflow, and reporting; and most importantly, 4) interacting with auditors.
Whether you’re public or private, get started now on a good control environment – just do it!