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Finance Law May Force IT System Overhauls
By GARY H. ANTHES APRIL 14, 2003

The Sarbanes-Oxley Act, the U.S. government's attempt to bring honesty, clarity and speed to corporate financial reporting, may ultimately require costly overhauls of budgeting, reporting and decision-support systems. But much remains unclear about the potential impact of the law, which was passed last summer. Even companies whose systems appear to comply with the act are uncertain as to exactly what some provisions mean and when they must comply with the requirements, according to recent interviews with IT and business executives. The uncertainty stems from the fact that the Securities and Exchange Commission is still fleshing out the details of the law through a series of proposed rules. Moreover, the SEC has delegated some regulatory tasks to other organizations, such as stock exchanges, and they have yet to act. But the combined weight of Sarbanes-Oxley and other new regulations is expected to result in major systems changes at some companies. "We're looking at a whole series of governance and compliance issues related to IT for Sarbanes-Oxley," said David Klementz, chief financial officer at Progress Rail Services Corp. in Albertville, Ala.

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4/21/2003

a tool that gives Klementz near-real-time financial-performance metrics. "Some aspects of that are typical [information systems issues]. he said. such as inventory control." Karpoff said.computerworld. and we'll have to look at those things a little more strenuously.00. monitoring and reporting processes. a finance professor at the University of Washington in Seattle. "I remember an auditor once recommending that we have 28-digit alphanumeric passwords that changed monthly. David Harrison. Tyler warned other IT managers to brace themselves for tough requests from auditors. are just the beginning.80292. bit is that firms can use Sarbanes-Oxley as an impetus to completely overhaul their control." he said. That's what's going on at Progress Rail. in New Orleans outsources all of its core financial systems.C. which maybe in the past you decided not to pursue because you didn't see the justification. in Cary.4814." said Irving Tyler. Klementz said Sarbanes-Oxley and other new SEC regulations are prompting Progress Rail to do a top-to-bottom examination of other systems that can affect its financial results.000. the bank's audit director. Hibernia Corp. which cost about $500. in Conshohocken. said he's relying on the outsourcer's legal staff to ensure that the systems comply with laws like Sarbanes- http://www. In addition. you might have to be more aware of now. "Things like that. adding that he's also hiring IT and regulatory-compliance consultants. "We're greatly increasing IT staff in order to make sure I'm comfortable that systems and controls are in place. such as access controls." Klementz said. Jonathan Karpoff. "What I'm hearing quite a Chemical Corp.html 4/21/2003 .Finance Law May Force IT System Overhauls . said executives whose necks are now on the line at report-signing time will demand systems that are more timely Irving Tyler.com/printthis/2003/0. Another key provision in Sarbanes-Oxley stipulates that outside auditors must examine and verify the effectiveness of a company's internal financial controls. CIO at Quaker Chemical Corp. N. Progress Rail is also using SAS Balanced Scorecard. the company faces higher labor costs. Those steps. the act requires CEOs and chief financial officers to attest that annual and quarterly financial reports contain no material errors or omissions. Pa. CIO at Quaker and accurate. The supplier of railway products and services recently scrapped a combination of manual procedures and spreadsheets for consolidating the books of its subsidiaries and installed a set of financial-data integration and analysis software from SAS Institute Inc. That could tip him off to business problems that might otherwise go undetected until a quarterly audit is done.Computerworld Page 2 of 4 For example." Some companies hope to avoid many compliance problems by outsourcing management of the issue.

Trend Micro FREE Trial Version of Trend Micro Antivirus Gateway Protection Need a Mobile & Wireless Strategy? Attend Mobile & Wireless World. Source: Computerworld Sponsored Links The Wireless Corporation: Get a free download of this latest Computerworld Executive Briefing compliments of Intel Centrino. Section 301: You must provide systems or procedures that let whistle-blowers communicate confidentially with your company's audit committee. Section 201: Firms that audit your company's books can no longer also provide you with ITrelated services.com/printthis/2003/0. Section 409: Companies must report material changes in their financial conditions "on a rapid and current basis. California http://www. you should) maintain all audit-related records. "I could set up telephone reporting or intranet reporting. May 6-9. such as how to satisfy a requirement that corporate whistle-blowers be able to communicate confidentially with the company's audit committee. No date set.80292. ADIC Download Your FREE Scalar i2000 Starter Kit Today. No date set." he said. Section 404: CEOs. Effective now. Palm Desert. "We haven't decided one way or the other.html 4/21/2003 . Section 302: Your CEO and CFO must sign statements verifying the completeness and accuracy of financial reports. but employees may feel that neither of these provides sufficient privacy." Potential IT Implications The Sarbanes-Oxley Act Section 103: Your auditor must (and therefore. No effective date set. including electronic ones.Computerworld Oxley.Finance Law May Force IT System Overhauls . Page 3 of 4 But Harrison acknowledged that the new law raises questions he has to deal with. Effective now." The act calls it "real-time disclosure" but doesn't define what that means.computerworld.00. for seven years. Effective now. CFOs and outside auditors must attest to the effectiveness of internal controls for financial reporting.4814.

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