Sarbanes-Oxley Ongoing Compliance Guide: Key Processes and Summary Checklists

Unifying Financial Statements, Close Tasks, and SOX Controls

Experts estimate that most senior financial executives believe their current processes and systems are insufficient to deliver sustained, cost-effective compliance with the Sarbanes-Oxley Act. A recent analysis conducted by software company Movaris substantiates this thinking. The study revealed that 31 percent of companies with material weakness disclosures had weaknesses in operational finance, with 46 percent of those relating to the close and consolidation process.^[1]

^[1] Movaris analysis of publicly filed MWDs for 2004.

Most companies complete their SOX assessment after their financial close, which can delay the detection of failed key controls. Discovering failed controls after the financial close requires the reevaluation of financial results and may lead to materials weakness disclosures and financial restatements. This can be an expensive, time-consuming, and risky process in today’s environment of increasingly complex accounting rules and regulatory requirements. Since the passing of the Act in 2002, restatements have grown from 330 to an astounding estimated 1,200 in 2005.^[2] This finding reinforces the fact that improvements must be made to strengthen controls and efficiently obtain an accurate assessment of a company’s financial position.

^[2] “Restatements – Traversing Shaky Ground,” Glass Lewis & Co, January 2006.

There is an inherent risk in continuing to rely on manual and/or disparate processes for financial ...