SOX News

10 Threats to SOX Compliance: Report Released

To help CFOs of smaller public companies to navigate wisely through the Sarbanes-Oxley compliance process, a free report titled 10 Threats to SOX Compliance for Smaller Public Companies is available from Lord & Benoit online at http://www.section404.org/. This report can help executives to identify potential risks, develop action plans to remediate these risks, and take quick action to minimize the likelihood of an adverse Section 404 report in 10-K filings due to the SEC on March 30, 2008.

The Lord & Benoit study reveals that the first year of SOX compliance may be particularly challenging for smaller public companies as they transition from entrepreneurial to corporate growth. The top ten threats to SOX compliance for smaller public companies appear to be: (1) accounting and disclosure controls; (2) treasury; (3) competency and training of accounting personnel; (4) control environment; (5) design of controls or lack of effective compensating controls; (6) revenue recognition; (7) financial closing process; (8) inadequate account reconciliations; (9) information technology; and (10) consolidations, mergers, and intercompany accounts.

The Lord & Benoit study describes each of these ten threats in greater detail. The study is based on the results of 148 public companies with evidence of material weaknesses and revenues under $100 million during their first management assessment under Sarbanes-Oxley Section 404.

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