Compliance Software's Bonus Benefits

Because of the complexity of the Sarbanes-Oxley Act, many companies are turning to specialized software to help manage their compliance activities. The right tools improve processes, as well.

When Congress passed the Sarbanes-Oxley Act of 2002, it seemed like a straightforward proposition: The law would eliminate a staggering array of corporate problems and abuses ranging from doctored financial records to sloppy audit practices. But for many companies, achieving total compliance is proving far more difficult than they imagined.

The sheer number of provisions in the legislation is daunting. In addition to Section 302, which requires certification of financial reports, and Section 404, which mandates that companies publish a detailed description and assessment of their internal control structure and financial reporting procedures, the law contains more than four dozen requirements.

Although some organizations may be able to achieve compliance by using checklists and spreadsheets, most are now turning to specialized software that helps them track tasks, manage documentation and monitor the overall process. Numerous vendors, ranging from enterprise resource planning (ERP) software providers to small independent consulting firms, have developed compliance assistance offerings in recent months. These products help companies automate their compliance efforts and streamline a vast array of control activities.

For many organizations, understanding and evaluating these tools ranks high on their list of priorities. Choosing the right product is a complex task. In addition to content management systems and workflow automation, an effective compliance assistance package must offer comprehensive risk assessment and project management capabilities.

Compliance doesn't come cheap. Gartner Inc. predicts that a typical Fortune 1000 company will spend at least $2 million on Sarbanes-Oxley compliance activities through 2005. While expenditures on internal processes and audit and consulting services will account for most of that outlay, software purchases will be a significant component, and one that will absorb a progressively greater proportion of overall spending as companies' compliance initiatives develop. (See Where Does the Compliance Money Go? below.)

"Depending on the organization, Sarbanes-Oxley compliance can range from a minor tremor to a major earthquake," says John Hagerty, vice president of AMR Research in Boston. But progressive organizations view their investment in Sarbanes-Oxley compliance assistance tools as an opportunity to streamline and improve internal control, boost shareholder value, and cut costs down the road.