Sarbanes-Oxley: Don't Focus Only on Financial Auditing

By D. Manggala (November 5, 2004)

From Quality Progress magazine (published by American Society for Quality) on its November 2004 edition, there is an interesting article about Sarbanes-Oxley Act implementation. The article is titled "Sarbanes-Oxley: Pain or Gain?" written by Charles G. Cobb, a consultan from Meddfed, MA.

The idea discussed by the author is interesting; he recommends companies to use the strict requirement of Sarbanes-Oxley (SOX) to be the base to improve the overall management system. Therefore, he proposes an integrated management system approach that not only just focus on financial auditing but also try to integrate the efforts with quality improvement (related to ISO 9000), or other requirements by governments such as safety and environmental requirements.

In other words, Cobb suggests companies to use the requirement of SOX as an opportunity to "tighten its management practices and improve its business." If companies only focus on financial audit, there will be an excessive focus on reporting and paper works which will only add small value to the companies. By an integrated management system approach, there will be a systematic managament process in doing business. In today's environment there are various requirements for a company's operation: business objective, safety and environmental standard, government regulations (including SOX) which in implementation could bring many parts of the company to different directions.

So, instead of dealing with all those different requirements and standard separately, according to Cobb, the right approach is "to focus on the design of the overall business management system and integrate the appropriate controls to meet all the requirements."

The idea in the article is very interesting and a very valid observation; however, in its implementation it will be very difficult. Coordination and streamlining many organizations is the ultimate challenge for many companies today. Integrated management approach is a great idea but a lot of companies are struggling in integrating a business unit or, even, a department! (Please click Faktor-Q for more article about integrating value chain)

Integration often needs an overhaul of the whole system in a company: management system, organization structure, and also information-physical flow system. The most important thing, it needs a strong vision by its CEO & other executives.

Some great companies might be able to do what is suggested by Cobb, and would get benefit in global competition because they could quite easily comply with many standards (ISO, CE Marking,etc.), government regulations (SOX, safety, environments, etc.) and the most importan thing they will be able to compete in their producs/services market.

And from time to time, this kind of challenge (such as SOX) and how companies deal with it will differentiate great companies with the rest.