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Senior Editor

A look at corporate financial accountability

May 19, 20032 mins
Manufacturing IndustryWi-Fi

* The Sarbanes-Oxley Act of 2002

Few prices of legislation have left the corporate financing world with so much fear, uncertainty and doubt as the Sarbanes-Oxley Act of 2002.  Passed by Congress last July following a season of high profile accounting scandals, the Sarbanes-Oxley Act basically requires publicly traded companies to provide more timely, accurate and detailed financial reports.

According to our Special Focus author Ann Bednarz ( while companies may have been able to meet initial Sarbanes-Oxley requirements with little disruption to existing financial reporting processes, pending provisions have broader IT implications that could require a company to overhaul or upgrade its systems.

The ARM Research firm cites sections 404 and 409 of the new legislation as particularly onerous.

Section 404 requires companies to certify their financial reporting processes and internal audit control structure. In other words, companies need to document and attest to not only their final numbers, but also the processes by which they arrived at those numbers.

Under Section 409, companies must disclose material events that affect the business within 48 hours of when they occur. This includes not only financial events, but also operational events, such as if an airline loses its best fuel supplier, or there’s a disruption in a retailer’s supply chain. Under Sarbanes-Oxley, companies will be required to report the event and its financial consequences.

AMR Research suggests Sarbanes-Oxley Act has the potential to be bigger than Y2K in how it affects companies. The research firm predicts the Fortune 1000 will spend more than $2.5 billion in investigation and initial compliance-related work.  The research firm also notes that in a survey of 60 Fortune 1000 public companies, 85% predicted Sarbanes-Oxley will require changes in IT and application infrastructure that support the business.

This is a topic you’ll be hearing more and more about as its implications spread out.  For more on this story see: