The pressure’s high and it’s building as corporate leaders seek to meet fast-approaching deadlines imposed by new corporate governance legislation.
“The majority of companies have either just begun the work necessary to meet the deadlines – or they haven’t even started,” says Steve Taylor, president of Resolver Inc., a Toronto enterprise risk management firm.
Resolver conducted the Compliance 2004 Study in partnership with the Institute of Internal Auditors, the Institute of Corporate Directors and Professor Steven Salterio of Queen’s School of Business.
The online survey of 100 private and public firms was conducted between July 1 and Sept. 10.
The senior executives of almost seven in 10 companies say they’re feeling pressure to meet the deadlines imposed by new governance legislation.
Sixty-nine per cent of the executives said they’re experiencing more than average time pressure.
Companies are required to implement the new governance and compliance changes beginning in the fiscal year commencing after March 30, 2004.
“The new regulations are sure to bring value to corporate governance and ultimately all stakeholders,” says Jodi Swauger, assistant vice-president of the Institute of Internal Auditors.
“However, for many organizations, the preliminary tasks of designing a workable timeline, determining resources required, projecting costs and assigning personnel are daunting – and all this is prior to the actual compliance work.”
Then there’s the compliance work itself.
“Clearly, business leaders are worried about the time it will take to complete it,” says Resolver's Taylor.
“But they’re also worried about the scale and complexity of the task.”
The main concern for most organizations involves compliance with something called Multilateral Instrument 52-109 (Certification of Disclosure in Issuers’ Annual and Interim Filings.) Similar to Section 404 of the U.S. Sarbanes-Oxley Act of 2002, it requires companies to document, test and report controls for financial reporting and disclosure.
Eighty-three per cent of the survey respondents believe management’s required evaluation of internal controls is “important, quite, very or extremely important” in increasing the reliability of financial disclosure, but only 44 per cent feel ready to implement the required changes.
“The lack of readiness to document and test controls is a result of a decade of corporate downsizing leaving fewer middle managers to carry out control activities,” says Salterio of Queen’s.
“There was a belief in the 1990s that middle managers were obsolete, and companies are now finding all sorts of surprises as they document their internal controls.”
