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Prepare for a bigger role in Sarbanes-Oxley compliance

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in Hiring,HR Management,Human Resources,Leaders & Managers,Management Training,Performance Reviews

Issue: Sarbanes-Oxley's focus on HR requires you to do more to help your organization comply.

Benefit: Helping your organization meet SarbOx mandates enhances your role as a strategic partner.

Action: Plan ahead to anticipate issues that arise from SarbOx audits and questions that will be asked, such as those below.

HR departments at public and private employers should prepare to become more involved with Sarbanes-Oxley compliance. Reason: More employers are looking to HR to take additional responsibility for SarbOx compliance and organize training. SarbOx auditors are demanding more detail about the costs of HR-administered programs.

"HR has to understand the SarbOx auditing process," says Roxanne Gilbertsen, senior consultant at Hewitt Associates. "Our clients are starting to see more attention on all HR programs, including defined benefits, retirement, incentives and recognition and performance management programs."

Employers are making HR a more important part of SarbOx compliance preparation. While 83 percent of organizations assign responsibility for SarbOx to finance departments, 54 percent also involve HR, according to a Hewitt survey. HR's role often involves training.

"SarbOx training has become a big issue," says John Hagerty, an analyst at AMR Research Inc., which helps employers use technology to comply with SarbOx.

"Companies are now looking to mobilize the whole company, including HR, around the concept of compliance."

What is the Sarbanes-Oxley Act? The 2002 law, passed in the wake of several corporate scandals, requires public companies to meet certain financial reporting and corporate governance requirements.

However, more private employers are complying voluntarily to help prevent problems or make the organization more attractive for potential buyers and mergers.

SarbOx has prompted 44 percent of CFOs at private companies to change or review their accounting practices, according to a Journal of Accountancy survey.

To comply, employers typically hire independent public accounting firms to perform SarbOx audits according to government guidelines. Auditors often focus on costs related to pay and benefits, especially defined benefit plans. Auditors may ask HR questions such as:


  • What are the expenses associated with the plans?



  • What accounting method is used to calculate the plan's expenses?



  • Why did you select the accounting method you use and not another one?



  • Why did you choose certain investments for the plan?




Auditors may want documentation for hiring and retention costs, pay increases and cost-of-living raises. Lack of documentation will raise more questions. If your organization surpasses its budget in areas such as pay and benefits, be prepared to help explain why.

Online resources:

Sarbanes-Oxley compliance advice


  • www.sarbanes-oxley.com



  • www.insidesarbanesoxley.com



  • www.auditnet.org/SarbOx.htm.



  • http://en.wikipedia.org/wiki/Sarbanes-Oxley

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