For IT vendors Sarbanes-Oxley (affectionately known as SarbOx) was an opportunity to be seized. Enterprise software vendors of all stripes – financial applications, business intelligence, content management – have all jumped on the SarbOx bandwagon, offering applications and tools that promise to alleviate the pain and financial burden of compliance.
But three years on, senior financial executives, whose necks were literally put on the chopping block by the Act, are cautiously optimistic. A recent survey conducted by compliance controls software specialist Approva Corp finds that opinion about the Act is slowly changing.
Its survey states that nearly 45% of 200 financial executives it interviewed now regard SarbOx as more of a net gain to investors than a net loss. The survey shows that 87% of senior financial managers see SarbOx as a top priority for their firms.
When SarbOx first came out it was harshly criticized by the business community at large, who saw it as an unnecessary financial grind in an already tight business environment. They were particularly weary of the tight deadlines for compliance and the expense of picking through their financial reporting controls with a fine toothcomb and re-jigging their internal financial processes.
While analysts and the media have played their part in portraying SarbOx as the devil incarnate, Approva’s survey paints a different picture. Over 40% of respondents now see SarbOx in a positive light – as a way to improve our business controls and processes. And around 10% said the Act improved investor confidence.
However, a significant number – nearly 30% – were still entrenched in the view that SarbOx was some kind of corporate tax.
One respondent called it the Accountant Full Employment Act, saying that auditors had profited greatly from a situation they helped create in the first place. All [SarbOx] really does is codify what auditors should have been doing all along, the respondent was quoted as saying.
Over 55% of executives also complained that SarbOx impacted the competitiveness of US firm in international markets. We do it because we have to, one financial executive said. Its a waste of time and money. As an international company, its impossible to maintain consistency with our global partners.
Of course IT companies, many of whom are themselves subject to the same SarbOx laws that their products are supposed to address, are not complaining. Ironically, some have even fallen foul of the dreaded Section 404 reporting requirements of SarbOx.
SarbOx and other corporate compliance IT spending is estimated by AMR Research to reach $5.8bn by the end of this year.
But with the passing of the initial SarbOx deadlines, Approva’s survey however shows that spending is starting to slow down now. In areas like audit, IT tools and external professional services costs have risen less than 25% recently. The survey found that it was the larger companies (over $1bn in sales) that were keeping a particularly close eye on cost control – 75% said they kept costs increases to below 25%. The findings differ from other studies that show SarbOx costs still doubling.
Approva’s survey also found that use of technologies to better document internal financial controls continues to play a key role in SarbOx compliance. Around 65% of companies are aggressively adopting advanced documentation tools, while 40% are automating the testing of controls.
Interestingly less than 25% of companies are looking to outsource their SarbOx initiatives – testament to its strategic importance.
