As companies work to meet the strict financial accountability regulations of the federal Sarbanes-Oxley Act, IT...
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workers are being called upon to ensure that their companies' business applications can provide the tools required for financial management.
Passed last year, the Sarbanes-Oxley Act came in response to the high-profile Enron and WorldCom scandals and puts in place measures to protect against accounting errors and fraudulent procedures in the workplace. The act is administered by the Securities and Exchange Commission, which sets deadlines for compliance and publishes rules on requirements.
In a lot of cases, IT will be ensuring that controls are in place to make sure that the CEOs and CFOs of companies can attest that their internal practices and business monitors are correct and that the organization is in compliance, said Kraig Haberer, global director of product marketing for SAP's financial suite, mySAP Financials.
Haberer is meeting with SAP representatives from a dozen U.S.-based companies this week in a customer council to discuss Sarbanes-Oxley compliance and how they want their SAP systems to support it.
"We'll share with them our plans and ideas and then solicit their feedback," Haberer said. "We plan to accumulate their feedback and roll it into the product development process."
The level to which a company's internal controls have to be documented and assessed -- and then finally attested to by an outside auditor -- came as a shock to some companies, Haberer said.
The deadline to comply with that portion of the act is June 15, 2004, for most large U.S. companies. Small firms and foreign private companies have until April 15, 2005, to comply with the new regulations.
"The depth to that piece of the act has caused the most pain to the companies," Haberer said.
He said that many of the capabilities that companies are looking for are already built into the mySAP Financial software, part of the mySAP Business Suite in the SAP R/3 system. The software has reporting, consolidation and analysis tools included, though they may not be fully used by companies.
The SAP financial software also contains an audit information system. It allows companies to extract data from the system and conduct reporting from a transactional level, as well as the macro level, to help prepare an internal report on a company control system.
SAP also plans to enhance its applications. Upgrades will include additions to meet the new whistle-blowing requirements of the act, which provides protection to employees reporting corporate and securities fraud by publicly traded companies.
SAP is creating an audit portal where employees can log in anonymously and report potential acts of fraud through the system to a company audit department or internal control board, he said. The software is also being upgraded to allow companies to provide audit information outside of financial operations, such as company travel, which may affect overall business operations, he said.
"Sarbanes-Oxley is on the agenda for every publicly traded company and those wishing to be public, and it really impacts those companies that are $75 million in revenue or greater," said John Van Decker, an industry analyst with Stamford, Conn.-based Meta Group, in a recent webcast hosted by SAP.
Companies are spending a lot of money to evaluate their financial management, he said. One chief information office of a large company, according to Van Decker, said he's going to be spending $5 million on evaluating and upgrading financial processes.
"A number of private companies that deal with larger companies, that are going through Sarbanes-Oxley compliance initiatives, may also have to conform to what some of their customers require," Van Decker said. "At this point, every public company is at risk."
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