5 min read

Address Compliance Efficiency

Revamping and enhancing systems to overcome regulatory burdens



An audit and control study conducted by Ventana Research has shown that a majority of people in finance departments believe software can be worthwhile in managing the administrative aspects of compliance, especially the Sarbanes-Oxley Act, particularly in speeding the process and reducing errors. Yet, about half of the respondents indicated they do not know enough about a variety of solutions (such as document management and business process management) that can be helpful in the compliance process. The study also showed participants were skeptical about general claims for "Sarbanes-Oxley" software. In our judgment, the results demonstrate the failure of software vendors to market and sell effectively to people who are looking for solutions to their compliance issues.

As companies wrap-up their Sarbanes-Oxley section 404 initial compliance efforts, we recommend that finance departments initiate specific programs to ensure their IT systems are promoting (and not hindering) efficient compliance execution. This includes establishing committees to get smarter about the range of solutions that can minimize or eliminate the administrative burdens of compliance. We also recommend that software companies with compliance solutions recognize and address their sales and marketing shortcomings in selling to finance organizations.


Ventana Research recently conducted a study of a variety of compliance and audit issues. Our analysis of the responses we received only includes companies with over 1,000 employees because larger companies face different, more complex audit and control issues. Also, to insure relevance, in cases where questions touched on Sarbanes-Oxley compliance, the responses only include those companies covered by the law. (Other studies on this topic we have seen do not adequately screen responses. For example, they include small, private businesses that do not have to comply with Sarbanes-Oxley and have extremely limited audit requirements.) A majority of the respondents worked in finance departments with director to CFO titles — the rest were either line-of-business, IT or "other."

One area covered by the study was the use of software. Some software vendors jumped on Sarbanes-Oxley as a marketing tool believing it would stimulate demand just as Y2K proved to be a tonic for ERP/accounting systems demand. However, it should have been clear to them that the initial phase of section 404 compliance was more about processes and internal systems, not new software (see "Making Sarbanes Oxley Pay," 5/27/03). Meanwhile, we found many of the Sarbanes-Oxley themed messages unconvincing — at times even wrong — which may explain why a clear majority of respondents were skeptical that there are "Sarbanes-Oxley" solutions. It also makes it clear why most did not use software in their initial compliance efforts.

At the same time, a large majority of respondents expressed their belief that using software to manage ongoing Sarbanes-Oxley compliance was worth the money. The most frequent reasons given were because it would be able to speed up the process of managing repetitive administrative tasks and reduce errors.

When asked how knowledgeable they were about major categories of software that can help manage ongoing compliance efforts, more than half of the participants indicated that they "don't know enough but want to know more." For a general discussion of using software in the compliance process see "Sarbanes-Oxley: The Document Management Dimension," 06/06/03; "Sarbanes-Oxley: The Process Dimension," 7/11/03; and "Sarbanes-Oxley: The Reporting Dimension," 9/19/03.

Achieving Sarbanes-Oxley 404 compliance has been a significant distraction to finance departments. Based on our research we estimate it has taken about 12% of finance's time, and most respondents believe it will be a productivity drag well into the future. To address this problem, we recommend that finance executives evaluate their existing systems for ways to promote efficiency. For example, study participants thought automating manual accounting processes, harmonizing charts of account and eliminating spreadsheet use would all reduce audit costs. Given the lack of knowledge of systems that might improve finance's productivity in performing the administrative tasks related to regulatory requirements, we also advise our clients to form committees to evaluate potential software solutions. The committees should be part of an enterprise-wide compliance efficiency initiative that has specific, measurable objectives, such as "reduce audit fees by 'x' percent" or "cut 302 attestation cycle time by 'y' days."


Ventana Research asserts that software has the ability to overcome a large portion of the inefficiencies created by the new regulatory environment. In our experience, finance organizations are not knowledgeable enough about how they can use software to improve productivity. Using existing software to support redesigned processes, re-aligning existing systems to new processes, and the addition of new software, particularly to automate routine administrative tasks, are all examples of this. Many CFOs do not recognize that information technology has already had a profound impact in substantially improving the productivity of finance organizations over the past decade.

Software companies have not helped matters. In our view, only a handful can truly "talk the talk," or have development, marketing and sales people who truly "get" the needs of the average CFO or finance staffer. We think this is particularly true for software companies that traditionally have not sold to finance departments, such as content/document management solution providers. In our view, they need to concentrate more on the "steak" and less on the "sizzle."

Robert Kugel is CFA, VP & Research Director - Financial Performance Management at Ventana Research (, a research and advisory services firm.