The Sarbanes-Oxley (SOX) Act of 2002 codified how enterprises must report and audit their financial information. According to Protiviti’s “2017 Sarbanes-Oxley Compliance Survey,” 72 percent of the companies surveyed had revenues of $1 billion or more in the past year. Furthermore, 78 percent of these organizations went beyond the requirement for the second year of SOX compliance, as reported by Help Net Security.
The Shifting SOX Compliance Landscape
The survey queried 468 chief audit executives, internal auditors and finance leaders in U.S.-based public companies across several industries. Respondents noted that Public Company Accounting Oversight Board (PCAOB) audit requirements, new revenue recognition standards and cybersecurity concerns were the main factors driving SOX compliance efforts.
As a result of the PCAOB’s stricter reporting requirements, compliance activities have grown more stringent over the past year. Seventy-five percent of those surveyed indicated that external auditors have become more demanding as a result of the new standard. Meanwhile, 64 percent noted an increased focus on evaluating deficiencies.
A new revenue recognition accounting standard will take effect in the next fiscal year, which will lead to additional shifts in the compliance process. Because of this, 26 percent of respondents pointed to an increased emphasis on testing controls for revenue recognition policies.
Cybersecurity Comes Into Focus
The survey also revealed a heightened level of awareness around cybersecurity, which led to more time and resources dedicated to compliance practices. Of the organizations that released security disclosures in 2016, nearly one-third increased the hours spent on SOX compliance by 16 percent.
No matter the size of the organization, the number of hours devoted to compliance rose roughly 60 percent last year. However, the report found that costs were going down even as the hours rose. Protiviti attributed this to the growth of external service providers, which caused associated costs to show up in business unit accounts rather than direct SOX compliance accounts.
SOX is no incidental regulation for businesses. In fact, it directly affects financial results. Hours devoted to compliance efforts may level off as an organization gains experience, but efforts will always need tweaking at the compliance landscape inevitably shifts over time.