June 29, 2010
CIOs still need to ensure their company's IT systems and controls are in compliance with Sarbanes-Oxley requirements following a Monday ruling by the Supreme Court that left most of the legislation's mandates intact.
Ruling on a challenge to the act brought by the Free Enterprise Fund, the high court—in a narrowly crafted, 5-4 ruling—said a provision that excludes Presidential input into the makeup of the SOX-mandated Public Company Accounting Oversight Board is unconstitutional. "The diffusion of power carries with it a diffusion of accountability," wrote chief Justice John Roberts. "Our Constitution was adopted to enable the people to govern themselves, through their elected leaders. The growth of the Executive Branch, which now wields vast power and touches almost every aspect of daily life, heightens the concern that it may slip from the Executive's control, and thus from that of the people," Roberts said. The Justices, however, let the rest of the act stand. That means tech chiefs at publicly-traded companies will have to continue to focus on compliance with Sarbanes-Oxley Section 404. The section requires senior executives to attest to the fact that their financial reporting systems, along with the underlying IT infrastructure that supports them, are effective, reliable, and fit for purpose. Not unlike the Y2K crisis, SOX spawned a cottage industry of IT consulting firms that specialize in helping enterprises ensure their systems are in compliance with the act's provisions. Those firms, at least, will doubtless welcome the decision, which marked the end of the Supreme Court's current term. SOX was enacted in 2002 in the wake of accounting scandals at Enron, WorldCom, and other book-cooking companies. It was sponsored by Sen. Paul Sarbanes (D-MD) and Rep. Michael Oxley (R-OH). It's been widely criticized for adding millions of dollars to companies' operating costs. Backers say the rules add necessary oversight to corporate accounting.
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