Chicago (June 9, 2004) -- Large companies and small companies appear to be split on their approach to compliance with Sarbanes-Oxley Section 404, according to a survey of financial professionals by management consultancy Parson Consulting.


Larger companies --defined as those with market capitalization of $1 billion or more -- rely more on software applications than smaller companies when preparing compliance materials to meet federal Sarbanes-Oxley Section 404 deadlines. Parsons defines smaller companies as those with market capitalizations between $75 million and $1 billion. One-third of larger companies view software as critical to 404 compliance, compared to 21 percent of small companies. Nearly the same number of smaller companies (32 percent) say they don’t plan to use software applications, compared to 11 percent of larger companies, according to the survey of about 100 professionals who hold senior finance/corporate governance positions.


Companies are also divided on which executive should oversee compliance efforts long term. While one-quarter of larger companies favor appointing a dedicated compliance officer, the same number believe the task should be spread across all senior management. Among small companies, 40 percent say the internal audit department should shoulder the responsibility for compliance. Nearly one-fifth of companies across segments are undecided, Parson reported.


According to the survey, nearly half of larger companies focus narrowly on 404 compliance by concentrating on the financial-reporting process, while smaller companies are reviewing processes across the enterprise. Parson reported that 40 percent of smaller firms plan to use 404 compliance as an opportunity to review their control environment across financial reporting, operational practices and information technology.


Anne Swaller, practice director of Parson Consulting, noted that “Larger companies are more cautious on expanding the scope of compliance program to reflect the increased time and resource demands on both a short- and long-term basis.”


The poll also found marked differences in how companies plan to employ software. Larger companies appear to approach 404 compliance with a greater sense of urgency, according to Parson, which noted that 72 percent of large companies that plan to use software tools are employing them now, compared to 45 percent of smaller companies.


Regardless of size, Parson said most companies believe non-financial processes such as information systems, risk management, and human resources will affect controls around financial reporting significantly.


Substantially fewer larger public companies (13 percent) cite employee orientation/ongoing training as a priority, compared to 30 percent of smaller public companies. Conversely, one-in-three larger public companies is employing technology enablers, compared to 20 percent of smaller companies, according to the report.


-- WebCPA staff

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