"IT Solutions for Sarbanes Oxley Act - Facts and Figures "

An independent special report on IT solutions for publicly trading companies seeking compliance with the Sarbanes Oxley Act.

$1.24 billion (or $91,000 per company) will be the aggregate annual costs of implementing Section 404(a) of the Sarbanes-Oxley Act, according to the SEC's PRA burden estimates.  http://www.sec.gov/rules/final/33-8238.htm#v

5,396,266 is the estimated aggregate annual burden hours of implementing Section 404(a) of the Sarbanes-Oxley Act, according to the SEC's PRA burden estimates. http://www.sec.gov/rules/final/33-8238.htm#P632_164785

PWC estimate that 76% of added cost for Sarbanes-Oxley compliance will come from additional internal resources http://www.srimedia.com/artman/publish/article_646.shtml

33% of respondents in a December 2002 survey said CEOs do not participate in the financial review of their companies' numbers prior to release.   http://www.smartpros.com/x37388.xml

100% of respondents say the Sarbanes-Oxley law is "very confusing." Parsons Group survey.   http://www.parsonconsulting.com Other findings reveal: 

• Less than 29% of respondents reported their companies currently are in full compliance with the Sarbanes-Oxley Act.

• 5% say they need more than a year to reach full compliance. 

• 60% of senior financial professionals report having made some kind of change to comply with the law and subsequent SEC rules while the same amount “foresee having to make new or additional” changes in their departments.

• 44% believe it will be somewhat effective in “removing conflicts of interest that auditing firms face” and one in three believe the Act will somewhat effectively “help companies achieve operational improvements in their financial departments.” 

More than 50% of respondents in a survey by BizNet Software said they do NOT have a formal document that identifies all the processes that are undertaken to get financial data into the general ledger for close. http://www.smartpros.com/x37388.xml 

65% of those same participants said their companies will seek to leverage Sarbanes-Oxley initiatives to achieve process improvements that will increase business efficiencies and competitive advantage.   http://www.businesswire.com/photowire/pw.071403/231955250.shtml

47% of average performing companies use spreadsheets as a budgeting tool instead of software that can integrate with other IT systems. The Hackett Group. http://www2.cio.com/metrics/2003/metric504.html

72% of respondents said their companies were NOT using any software products to help ensure their organization's compliance with Sarbanes-Oxley regulations, according to a May 2003 Global Auditing Information Network survey from the Institute of Internal Auditors.   http://www.gain2.org/shortsum.htm

51% of respondents said they would use the COSO control model for Sarbanes-Oxley 404 compliance. February 2003 Global Auditing Information Network survey. http://www.gain2.org/soasum.htm

Gartner: 85% of respondents in a Sept 2003 survey said they do not have an official budget for Sarbanes-Oxley compliance. Estimates of expected Sarbanes-Oxley spending in 2004 vary widely, from $15,000 to $4 million, including outside consulting, internal and external auditing, personnel, insurance and software.

"This survey shows that most companies are not leveraging what they have learned from other regulations to achieve best practices for Sarbanes-Oxley compliance," said Rich Mogull, research director for Gartner. "Companies are not addressing the financial requirements for compliance, so they're spending in an ad hoc fashion to piece together a compliance management process. To comply with the Sarbanes-Oxley act and subsequent financial reporting legislation, companies must develop road maps and budgets for formal compliance management processes across their organizations."

40% of the survey respondents have a Chief Governance Officer, responsible for overseeing the processes and reporting to the Board of Directors on all compliance activity. Three-quarters of these positions have been added only since 2002, reports Lane Leskela, research director for GartnerG2, who adds that the appointment of a CGO is a strategic organizational response to multiple compliance requirements.

ARMA International: less than one-third of executives said their company today would be very well prepared to face the challenge of an SEC investigation into their information control practices. 

"More than a year after Sarbanes-Oxley became law, companies are still struggling to understand and comply with its provisions," said Peter R. Hermann, CEO of ARMA International. "We all saw how document destruction contributed to the demise of Andersen and Enron. One key to the success or failure of this legislation is whether companies comply with requirements to review and update their internal controls for record keeping." Highlights of the research include:

• 50% of executives thought Sarbanes-Oxley would not be effective at reducing financial reporting problems, while 48% said they felt it would be effective

• 10% thought Sarbanes-Oxley was very  necessary, while 54% thought it was not necessary

• 37% of companies have yet to assess their own internal controls for managing information, which is now required as part of a company's annual financial audit

• 95% of executives said their companies will have to make some changes to their records management procedures to comply with Sarbanes-Oxley

85% of public companies intend to change their IT systems as part of their efforts to comply with Sarbanes-Oxley legislation. Those companies are planning to spend $2.5 billion in 2003 alone on projects related to compliance. CIO Insight

"Historically, contracts have not been well managed in most large organizations," said Andy Kyte, VP of Research Director, Gartner, Inc. "Not managing your contracts means you're not managing a key part of your business. Contract management software solutions are meeting important needs that have largely gone unmet."

"Customers are looking for vendors to demonstrate tangible, long-term business benefits - not just documentation of compliance. That means financial services executives need a single, managed view into all types of risk aggregated and consolidated across the enterprise. Solutions that can successfully meet these requirements will be well received not only in the Board room, but also by C-level executives and line-of-business users," said Deborah Williams, Group Vice President of Capital Markets and Corporate Banking at IDC's Financial Insights.

CFO Magazine reported in Sept 2003 that 48% of companies will spend at least 500,000 dollars on Sarbanes-Oxley compliance.

ComPsych report that its poll showed that 88% of employees would report accounting misdeeds, 37% of which would prefer a third-party reporting system such as ConfidentialSource. The poll asked: If you witnessed corporate or accounting misdeeds, would you report it?

• 51% - Yes, I would report, regardless of who collects the information.

• 37% - Yes, I would report, but only if a third party collected the information.

• 11% - No, I would not report because I would still be worried about confidentiality/retribution.

• 1% - No, I'm not interested in reporting against my company.

According to John Van Decker, a vice president of Enterprise Application Strategies at META, “The Sarbanes-Oxley compliance impact is not just being felt by large public companies. Rather, its impact will be felt by most companies doing business in the US." He added that "Private firms should at a minimum consider moving to best-practice financial management applications and even seek consulting services to evaluate current operations."

A recent META Group teleconference on SOX also yielded over 25% of attendees from private firms -- a large percentage of those firms plan on documenting and improving internal controls around financial management, including upgrading business applications in support of improved financial management.

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