75 Percent of Companies Are Taking Steps To Better Balance SOX


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Sarbanes Oxley : Law : Survey

75 Percent of Companies Are Taking Steps To Better Balance SOX

Bob Hirth
Managing Director
Protiviti

Sarbanes-Oxley (SOX) has been the core project of internal audit departments for the past two years, but that focus is shifting. According to a new survey by Protiviti Inc., three out of four companies see the need and are taking steps to better balance SOX compliance with broader risk management activities and priorities.

Sixty-two percent of these respondents plan to bring in additional internal audit resources as part of this rebalancing initiative, and 81 percent believe they will benefit moderately or significantly as a result of these efforts. The Internal Audit Rebalancing Survey was conducted by Protiviti, a leading international provider of internal audit and business and technology risk consulting services, from July 1 to August 15.

The survey was designed to assess how companies are approaching the process of ?rebalancing? internal audit functions after first-year SOX compliance projects, and the past and future roles of internal audit departments in regulatory compliance efforts.

?While Sarbanes-Oxley compliance understandably has been the top priority for most public companies, internal audit departments have a critical long-term responsibility to ensure the effectiveness of risk management processes and practices within their organizations,? said Bob Hirth, managing director for Protiviti and head of its internal audit practice.

?As the results of our survey indicate, companies are recognizing this and are ?rebalancing? priorities within their internal audit functions to address broader risk management activities along with ongoing SOX compliance in Year Two and beyond.?

Among the key findings of Protiviti?s Internal Audit Rebalancing survey:

? Most internal audit functions see the need to rebalance - Seventy-four percent of respondents reported that rebalancing efforts are either being planned or are underway at their organizations. Approximately 13 percent of survey respondents indicated they were not planning any rebalancing activities.

? Rebalancing will be a perpetual activity, with less hours devoted to SOX compliance in Year Two and beyond - To address Year One compliance efforts, 38 percent of survey respondents said they dedicated more than three-quarters of internal audit department hours. For Year Two, only 7 percent expect to spend this amount of time, and just 3 percent for Post-Year Two efforts. The most common response to expected amount of time spent on SOX efforts in Year Two and beyond was 20 to 50 percent (43 percent of respondents). Nearly one out of four respondents (24 percent) said less than 20 percent of their internal audit department?s time will focus on SOX compliance after 2006.

? In the effort to rebalance, many functions will add resources and increase internal audit budgets - Sixty-two percent of companies plan to add additional resources to rebalance their internal audit functions. ?This strongly suggests these organizations recognize that SOX compliance will continue to require time and attention, yet they still must get ?back to basics? with regard to the long-term responsibilities of internal auditing,? Hirth said. As part of these efforts, 65 percent reported their internal audit budgets will rise this year, 70 percent of whom expect increases of 10 percent or more.

? Many companies will look for outside assistance with their rebalancing efforts - As a result of rebalancing efforts, 38 percent of companies will increase their use of outside resources. Among organizations that currently co-source their internal audit functions, 42 percent said they would be relying more on external support. Of those that do not co-source, 32 percent will be increasing their use of outside experts.

? Internal audit will continue to play a key role in SOX compliance, though internal control documentation efforts will decrease - Almost all respondents reported that internal audit departments were very active in SOX Section 404 compliance and planning in Year One. Nearly 90 percent of respondents served as key members of or advisors to compliance teams or steering committees. For compliance efforts in Year Two and beyond, 46 percent said internal audit will continue to have ?lead responsibility.? However, a quarter of respondents anticipate less involvement in developing documentation in Year Two.

? The audit committee will play an oversight role in the rebalancing effort ? Half of respondents (50 percent) reported that the audit committee will have either moderate or significant involvement in their companies? rebalancing efforts. ?Audit committee involvement is a key component in aligning internal audit responsibilities with board and management expectations,? Hirth noted.

? Rebalancing will provide many benefits, the largest of which will be a more appropriate focus on risk - Nearly 30 percent of respondents believe rebalancing will result in more appropriate coverage of risk. The next most popular benefits cited (18 percent response for each) were reducing the costs of Section 404 and 302 compliance, and allowing internal audit to perform more traditional audits.

Protiviti conducted its Internal Audit Rebalancing Survey at The Institute of Internal Auditors? 2005 International Conference, where attendees were provided the opportunity to complete the 27-question poll. The firm also invited members of KnowledgeLeader, its subscription-based internal audit and risk management portal, to participate in the study.

Lastly, Protiviti surveyed numerous financial and audit executives nationwide who expressed interest in providing their perspectives on the topic of rebalancing internal audit priorities. Two out of three survey respondents had the title and responsibility of chief audit executive, internal audit director or general auditor. Combined with individuals having the title of internal audit manager or above, 91 percent of those participating in the survey held managerial positions.

Protiviti is a leading provider of independent risk consulting and internal audit services. The firm helps clients identify, assess and manage operational and technology-related risks encountered in their industries, and assists in the implementation of the processes and controls to enable their continued monitoring.

Protiviti also offers a full spectrum of internal audit services focused on bringing the deep skills and technological expertise to enable business risk management and the continual transformation of internal audit functions.

Protiviti, which has more than 40 locations in North America, Europe, Asia and Australia, is a wholly owned subsidiary of Robert Half International Inc. (NYSE symbol: RHI). Founded in 1948, Robert Half International is a member of the S&P 500 index.

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