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Governance, Risk Management, and Compliance: It Can't Happen to Us—Avoiding Corporate Disaster While Driving Success by Richard M. Steinberg

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Other Relevant SOX Provisions

Other SOX provisions, of course, have had significant implications on the reliability of financial reporting. Companies previously lacking codes of conduct developed them, and many others strengthened codes previously in place. A significant number of companies went beyond the letter of the SOX requirements, with broad-based codes applicable to all employees, and many used the impetus to establish broader ethics programs going beyond the code to ensure messages would be heard and embraced throughout the organization. Also, companies previously without a means to report allegations of misdeeds developed SOX-mandated whistleblower channels. Many companies, however, found they needed to do more work to make employees feel confident that action would be taken without reprisals. This issue continues today in many organizations.

Another impact was that audit committees became better positioned to fulfill their mandate, with their independence, enhanced capabilities, and sharper focus on financial reports and related internal controls strengthening the integrity of the reporting process.

Benefits in many cases were real, but did they outweigh the costs? The marketplace has sent mixed messages when companies have reported material internal control weaknesses. Depending on such factors as company size and industry, whether or not the weakness was pervasive, and whether it had already been or was being remediated, the markets reacted in varying degrees—for the ...

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