SEC head Donaldson calls for shifting emphasis to material risk
A champion of “eternal vigilance” on principle, US Securities and Exchange Commission head William Donaldson has come out as a pragmatist. Responding to mounting criticism about the costs of implementing Sarbanes-Oxley, Donaldson has signalled a willingness to help ease the compliance burden on public companies. In a speech late last week before the Foundation Financial Officers Group, Donaldson promised to release new guidance from the SEC that would make S.404 compliance projects “more efficient and effective” – and therefore less costly. He highlighted that “costs may have been due to excessive or duplicative effort by management and auditors” and also “may have been driven by a lack of a clear risk-based focus”.
“Mr. Donaldson clearly sees how important it is for all sides to get the focus of Section 404 right. And we welcome his new emphasis on identfying material risk," says RVR’s Toby Grey. "At the same time, we would argue that there is no need for companies to wait for the Commission’s report in order to have an efficient and effective project focused on identifying key processes and controls. It is already possible to achieve this. The experience of leading multinational companies such as Lafarge, Alcatel and Sodexho shows that a well managed, top-down SOx 404 project, with a materiality and risk-based focus, reduces compliance costs. It also drives the kind of business efficiencies shareholders are entitled to expect. The key to the success of these companies’ compliance projects is not only having clear visibility of operations across the group but also the ability to focus on their key processes and controls.”
“With the Foreign Registrant filing deadline pushed back to 2006, companies may feel that they can delay acquiring and implementing the necessary tools. Clearly, however, they can and should take action now. The sooner companies act, the sooner they will be running the efficient and cost-effective compliance projects that Mr Donaldson hopes for,” says Grey.
Note to editor: RVR is an Anglo/French provider of advanced IT solutions for Corporate Governance, Internal Control, Risk Management and Legal Compliance for SOx and other national regulatory frameworks. Among RVR's customers are numerous multinationals including Alcatel, Danone, Jefferson Smurfit, Publicis, Rexel, Sodexho and Thales.
If you are writing about Sarbanes-Oxley or other issues related to corporate governance and would like comment from Toby Grey or RVR Systems (www.rvrsystems.com), please call us on 0207 313 2405.
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