Key to Meeting Final SOX Deadline: Hiring and Training the Right People

The final deadline for compliance with the internal-control requirements of Sarbanes-Oxley is looming and non-accelerated filers are feeling the heat. Many companies have put off implementing Section 404, unsure how to tackle and pay for the necessary work. But there are ways to make compliance more manageable and cost-effective. Many companies will even find unexpected benefits. By being proactive, even at this late date, companies can move confidently toward the new – and seemingly final – deadline.

Who can blame companies if they’ve put off complying with the Sarbanes-Oxley mandate on internal controls and audit? The deadline has been reset numerous times, and complying with the requirements of Section 404 is time-consuming and expensive. But according to SEC chairwoman Mary L. Schapiro, this deadline is final.

“Since there will be no further Commission extensions, it is important for all public companies and their auditors to act with deliberate speed to move toward full Section 404 compliance,” said Schapiro. The deadline applies to companies whose fiscal year ends on and after June 15, 2010,

While many companies are apprehensive about meeting the SOX requirements, the truth is that there can be benefits for their businesses, such as cost savings, risk reduction and improved efficiency.

This last wave of companies also has an advantage over the accelerated filers. They can draw on the experience of those earlier filers and their consultants, avoiding missteps and going full speed ahead.

But how do companies get started (or rev up their efforts) as quickly as possible? First, they need to find the right resources, such as consultants and internal auditors. These professionals and other resources will only get scarcer and more expensive as the deadline nears.

Having the Right People is Key 
Skilled people with clear direction are at the heart of the effort. To maximize their efforts, companies can follow three strategies: hire experienced consultants, match each task or area of responsibility with the right skill level, and train employees to maintain the new control and monitoring systems.

Much of the responsibility of assessing what needs to be done, as well as identifying gaps in knowledge and skills will fall to the CFO or controller. These leaders often reach a similar conclusion: they don’t have the time or expertise in-house and will need a consultant for guidance and strategic planning.

While this route may look costly, it has a number of advantages. First, the cadre of experienced people know how to streamline the process and solve common problems. Although the initial cost may be significant, once they’ve completed their work and trained internal staff, those costs largely go away.

Consultants can also work closely with company leaders to assess what data and information is needed, a task that could otherwise seem daunting.

But companies should act fast. As the deadline gets closer and closer, there will be fewer consultants and they’re likely to be more costly. In particular, internal auditors are likely to be in high demand.

Saving Money by Matching Skill Levels to Task
The second element of the strategy is to get the right people, both internal and external, in the right roles. This has several major advantages: it speeds the process, provides hands-on training for internal staff who will ultimately have full responsibility, and can be very cost-effective.

Companies don’t need to hire CPAs and auditors for less complex tasks. For example, while auditors will have the final say on whether the controls meet the requirements, lower-priced analysts can do the initial documentation and testing, as well as information gathering and spreadsheet review. Similarly, IT professionals can offer support in coding, and implementing systems to limit internal access to financial data.

The third element of the strategy is to ensure that in-house staff are fully trained to run the new systems, controls and monitoring functions. Consultants are critical in transferring knowledge to the people who will maintain the systems, although their efforts may need to be augmented by internal training.

Effective SOX compliance depends on people power. Using variable-cost resources to meet that need can go a long way toward controlling costs. Although companies may feel squeezed by the deadline, effort and cost, they should remember the potential benefits, such as better control over their data and operations, reduced risk and fraud, enhanced efficiency and savings. With the latest deadline looking to be the final one, the time to act is now.