SOX and Improving Quality& Sustainability

Guide to BCM, 3rd Edition
SOX and Improving Quality& Sustainability

As companies take stock of their focus on "pass/fail" compliance with Section 404 of the Sarbanes-Oxley Act of 2002, it is time to reflect on the objectives and costs of this effort.  While the SEC's new guidance to management and the PCAOB's revamping of Auditing Standards No. 2 will help improve cost-effectiveness, senior management has a more important opportunity to focus on quality and sustainability.  This article asserts that every organization should take a step back to evaluate how to transition from the narrow focus on pass/fail compliance to a cost-effective, sustainable and value-added process.  Senior Management should not make the mistake of limiting focus to compliance and delegating responsibility for the transition to middle management with the usual mandate to reduce costs.  The opportunity is much more than just streamlining the compliance effort and applying the new SEC interpretive guidance.  It is also about improving the quality of upstream business processes and the sustainability of the internal control structure.  The risk we see is that companies will design an ongoing compliance process around a high-cost internal control structure.  That approach will not achieve the performance results most senior executives want.

 

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