US companies in trouble as SOx deadline approaches
As the deadline of March 15 approaches for US companies to report on their Sarbanes-Oxley compliance, the big accountancy firms say they expect one in ten to report serious difficulties.
The close to 5,000 US companies with fiscal year-ends of December 31 2004 have to report their annual reports with American regulators by March 15. Those reports will include company statements on the extent of their internal controls for the first time, and auditors' statements on the effectiveness of those controls.
But the big four accounting firms ? KPMG, Ernst & Young, PwC and Deloitte ? reportedly believe around 500 of those companies will either report material weaknesses in their controls or miss the deadline entirely.
This is despite US companies pouring millions of dollars over the past few years into compliance projects (and therefore auditors' pockets) to avoid any material weaknesses, in order to avoid negative reactions from investors or shareholders.
The problems companies are facing include ensuring that only the correct people have access to company data, which requires technology investment, and setting up sufficient practices for detecting fraud, which is the hardest area to test effectively.