Nearly half of senior executives of U.S Multinationals say their company made only satisfactory use of technology in support of its initial Sarbanes-Oxley Section 404 compliance efforts, but major reinforcements are on their way for Year Two, according to a recent survey by PricewaterhouseCoopers.
In fact, three in four U.S. multinationals will be making significant technology changes, directed almost equally at the control environment and the compliance process, as they continue to tackle the requirements of the Sarbanes-Oxley legislation, according to the results of PricewaterhouseCoopers' latest Management Barometer, a quarterly survey of top executives at large, U.S.-based multinational businesses.
“Lots of Room for Improvement”
Forty-seven percent of executives in the survey of 131 chief financial officers and managing directors said their company's use of technology in support of Sarbanes 404 compliance was “satisfactory — with lots of room for improvement.” Fewer, 38 percent, said their company did a “great” or “effective” job with technology. And 10 percent frankly identified 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, described their IT department as proactive in identifying ways to use technology more effectively. Another 29 percent rendered an “only somewhat responsive” evaluation, and 5 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,” said Jacqueline Olynyk, a partner with PricewaterhouseCoopers. “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.
Overall, Olynyk added, the surveyed companies have used technology in varying degrees to support their initial Sarbanes 404 compliance efforts, but she added that clearly there is room for future improvements.
Big Technology Changes Coming
Perhaps it is not surprising then that 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 10 percent will give primary emphasis to the control environment. Only 21 percent said 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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