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Enterprise Risk Management Best Practices: From Assessment to Ongoing Compliance by Anne M. Marchetti

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CHAPTER EIGHT

Ongoing Compliance Challenges

FOR MOST COMPANIES, ACHIEVING SECTION 404 COMPLIANCE HAS PROVEN to be much more challenging, and more costly, than initially anticipated. In most cases, for accelerated filers, initial and year one compliance efforts strained company resources while still leaving internal control issues. Their burden continues through year three and beyond.

Nonaccelerated filers have filed an initial certification more recently. These organizations are not required to submit an auditor attestation with their certification. In reality, several of these smaller organizations do not have all of the required evidence to support their certification, and many not have conducted the appropriate level of control testing. As a result, these companies have spent little or no time focused on ongoing compliance planning or execution, factors that may result in lack of efficiency, higher cost, and potential risk of noncompliance in the future. These resultant issues also magnify the importance of the role of the board and audit committee in assessing risk and ensuring compliance, which is discussed later in this chapter.

In general, both accelerated and nonaccelerated filers are faced with a number of ongoing compliance challenges, including:

  • The majority of compliance activity time continues to be spent on remediation, leaving little time to develop a long-term compliance plan or create more efficient processes.
  • The cost of compliance actually has grown in some ...

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