US multinationals to reinforce technology for SOX compliance - PwC

Source: PricewaterhouseCoopers

Nearly half of senior executives say their company made only satisfactory use of technology in support of its initial Sarbanes Section 404 compliance efforts.

But major reinforcements are on their way for year-two. Three in four U.S. multinationals will be making significant technology changes, directed almost equally at the control environment and the compliance process.
Lots of room for improvement
Forty-seven percent of executives say their company's use of technology in support of Sarbanes 404 compliance was "satisfactory—with lots of room for improvement." Fewer, 38 percent, say their company did a "great" or "effective" job with technology. And, ten percent frankly identify technology as a problem area requiring major improvements, going forward.

Effective use of technology linked to success of 404 compliance
U.S. multinationals' use of technology was described as "great" or "effective" by:
  • 52 percent of executives who said initial 404 compliance is perceived as a success throughout their company;
  • 33 percent who said 404 compliance is seen as a success, but primarily by executive or financial management only; and
  • 18 percent where the 404 initiative is judged not a success.

Forty percent said their IT department responds effectively to requests for better ways to support the compliance process and improvements in the control environment. Fewer, 21 percent, describe their IT department as proactive in identifying ways to use technology more effectively. Another 29 percent rendered an "only somewhat responsive" evaluation, and five percent said their IT group is seen as not helpful.

"Sarbanes-Oxley compliance efforts are revealing weaknesses in controls and business processes and accelerating companies' efforts to remediate these problems. Automation plays a key role in recording and managing identified deficiencies so management may be assured they are remediated effectively, efficiently and on a timely basis," said Jacqueline Olynyk, Partner, PricewaterhouseCoopers. "Overall, the surveyed companies have used technology in varying degrees to support their initial Sarbanes 404 compliance efforts, but there is clearly room for future improvements."

Big technology changes coming
Three of four surveyed multinationals (75 percent) expect to make significant technology changes in year-two of their Sarbanes 404 compliance, including:

  • 85 percent of those where tech support was seen as "satisfactory—with lots of room for improvement" in year-one;
  • 69 percent where technology was judged as having done a "great" or "effective" job supporting compliance in year-one; and
  • 77 percent where technology was described as a problem area.

Among companies making significant technology changes, 47 percent will give equal emphasis to the control environment and the compliance process; 18 percent will focus mostly on the compliance process, and ten percent will give primary emphasis to the control environment. Only 21 percent say no significant technology changes are planned. Four percent did not report.

"Senior executives see technology as an opportunity for both enhancing future Sarbanes 404 compliance and achieving overall efficiency and effectiveness of underlying business processes," said Olynyk. "For the 75 percent that will be making significant improvements, rationalizing the control environment and then embedding automated controls throughout cross-enterprise business processes will yield the biggest long-term gains."

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