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The Sarbanes-Oxley Act became law in 2002, to make companies more accountable to shareholders in a world rocked by scandals at companies like Enron and WorldCom. Sarbanes-Oxley (Sarbox or SOX) compliance made it mandatory for companies to be transparent in their financial reporting and impose better internal controls and measures for corporate governance. The Act also requires independent auditors to certify quarterly financial results.
Section 404, where most public companies are focusing their Sarbanes-Oxley efforts, requires that public companies must prepare reports to accompany their annual reports. These reports assess the effectiveness of the companies' internal controls and financial reporting procedures.
This requires a technological underpinning that facilitates integration, collaboration, reporting and monitoring.
Sarbanes-Oxley compliance is complex and burdensome to US businesses which are shelling out billions of dollars to achieve regulatory compliance.
Companies must identify their key processes, and important controls within those processes, and also measure the effectiveness of those controls. This requires collaborative effort from multiple departments. The process requires control points throughout the workflow and role-based identity management to determine who has access to what and when. A highly intensive documentation process which could involve (for example) between 210 and 280 control points, is a massive job when done manually. Automation technology makes the Sarbanes-Oxley compliance procedure consistent, sustainable and repeatable. Enterprise-wide standards have to be established to provide the management with 'big-picture' and 'drill-down' views of all data. This enables better decision-making and risk-management.
The task is huge, and so are the costs. Sarbanes-Oxley places a heavy HR and financial burden on companies. Small wonder, then, that most companies place cost-containment at the top of their corporate priorities. They are looking to India, well-positioned as a global finance and accounting outsourcing hub, to provide the answer.
Finance and accounting outsourcing (FAO) is the fastest growing segment of India's thriving BPO sector, which serves 50% of the world's largest banks. India's outsourcing firms help to cut costs (up to 60%) and human effort required to achieve Sarbanes-Oxley compliance. As a result, Sarbanes-Oxley related outsourcing to India is growing at more than 50% per year.
Technology is at the heart of the organizational systems underlying Sarbanes-Oxley compliance. Indian outsourcing firms are helping their US customers with every step of the compliance process, which requires database management, technology and automation, reporting, upgrading and testing customers' systems.
Companies are working towards making the Sarbanes-Oxley compliance a natural outcome of the way they do business. As a result of Sarbanes-Oxley, best practices instituted across the company bring in returns like:
Incorporating Sarbanes-Oxley compliance into the company's culture by using a business performance management (BPM) model will turn Sarbanes-Oxley into profit. Meeting regulatory requirements will then become just another process within the business. It's worth the effort!
Make Sarbanes-Oxley compliance a proactive initiative to run your business better by outsourcing your Sarbanes-Oxley compliance efforts to India.
Contact us to know how our expertise can help you expand your business horizons across multiple domains!