Survey: Firms Unsure of HR's Sarbanes-Oxley Help

July 22, 2003 ( - Many US companies were unprepared to meet Sarbanes-Oxley's initial deadline for imposing fairness and accuracy controls on their financial reporting, a new survey found.

A Deloitte & Touche survey of 65 HR executives of Fortune 1000 companies found widespread disagreement over the role human resources can play in helping companies achieve Sarbanes-Oxley compliance. The US Securities and Exchange Commission (SEC) eventually extended the deadline by 12 months to June 15, 2004.

According to the survey, many companies have not moved beyond the first steps, which include determining internal responsibility for performing a baseline assessment and subsequent annual evaluations of their controls and procedures for financial reporting. While 51% of respondents said the HR function is responsible for this activity, 29% said it “possibly” is, and 12% don’t know. Another 8% said HR is not responsible.

“Compliance with the internal control requirements of Sarbanes-Oxley offers a huge opportunity for HR to enhance its service delivery and improve overall organizational effectiveness,” David Glueck, a director in Deloitte & Touche’s Human Capital practice, said in a statement. “By helping companies establish, communicate, and annually assess the control environment, HR can have a significant impact on setting the tone and standards of acceptable behavior for ethical business practices within its organization.”

Specifically, HR executives can help companies comply with Sarbanes-Oxley by making sure there are enough employees to do the work and that the staffing has the appropriate skills sets and background to execute the necessary control activities.

In some cases, HR executives already are preparing to address internal controls but are not directly tied to their traditional role. For example, 56% of survey respondents plan to assess the roles and responsibilities of individuals with control activities to ensure they have the level of responsibility/authority/time/resources needed to complete these tasks. Moreover, 54% plan to work with the board of directors to increase the understanding of the board’s roles and responsibilities.