Financial Reporting: Could Compliance Get Easier?Financial Reporting: Could Compliance Get Easier?

The first round of a financial-reporting auditing standard was made public last week, a step toward providing guidelines for companies struggling to implement systems compliant with the Sarbanes-Oxley Act.

One bright spot: Because of delays in developing the standard, the Securities and Exchange Commission recently pushed back to Nov. 15 the deadline for compliance with section 404 of Sarbanes-Oxley, which requires management and auditors to certify that a company's financial controls are in order. The extension to the deadline, which was June 15, gives the Public Company Accounting Oversight Board, a quasi-governmental body of accounting pros, more time to work on the auditing standard it adopted last week. After a six-week period for public comment, the standard will go to the SEC for final approval.

The SEC had to grant the extension, says Mark Thompson, senior VP of finance and IT at Crown Media Holdings Inc., which operates the Hallmark Channel, a cable TV subsidiary of Hallmark Cards. "It was becoming difficult to have the deadline remain when the PCAOB hadn't established its rules yet."

The standard covers policies and procedures for maintaining accounting records, authorizing receipts and disbursements, and safeguarding assets. Signed into law in July 2002, Sarbanes-Oxley is intended to rein in the types of accounting abuses that sank Enron, WorldCom, and Parmalat.

A large company might spend upwards of $8 million on a compliance system, says John Van Decker, a VP at Meta Group. Systems run the gamut from Excel spreadsheets to high-end offerings from Documentum, FileNet, IBM, Movaris, Nth Orbit, and ERP providers such as Oracle and PeopleSoft. Products blend content, process, and data management, as well as workflow.