Marchetti Book Chapter 7: Ongoing Compliance Overview

Vocabulary terms and definitions related to ongoing compliance, the Sarbanes-Oxley Act (SOX), and risk management frameworks as described in Marchetti Book Chapter 7.

Sarbanes-Oxley Act of 2002 (SOX)

Legislation comprised of 11 titles designed to improve the accuracy and transparency of financial reporting and corporate disclosures while reinforcing ethical standards.

Section 404

A provision of SOX that requires internal controls over financial reporting and an external auditor attestation, often cited as the most significant cost increase for companies.

Section 302

The provision requiring the chief executive officer and chief financial officer to certify the accuracy of financial reports filed with the SEC, subject to criminal penalties and fines.

Section 409

Provisions regarding Real Time Issuer Disclosures that require an organization to disclose material changes in its financial condition.

Enterprise Risk Management (ERM)

A formal framework for a risk-based, top-down approach to compliance that helps identify and consider risks or events impacting a business.

Business Performance Management (BPM)

A performance measurement initiative that, when integrated with ERM, allows for the monitoring of key risk indicators to predict future performance.

Tone at the top

The influence executive management has on organizational behavior; if the top levels project compliance as a burden, it is perceived as such by employees.

Process Owners

Individuals who are directly accountable for the existence and effectiveness of internal controls within their areas of operation.

High-impact improvements

Remediation efforts that address material business issues, mitigate significant risk, and can be implemented within $90$ days.

Medium-impact improvements

Refers to improvements focusing on material business issues that require extended time and participation, typically taking between $3$ to $6$ months.

Control remediation

Corrective actions designed to improve the efficiency and productivity of operating processes while strengthening the overall control environment.

Shared services

A method of simplifying and streamlining transaction and reporting procedures through centralization to take advantage of economies of scale.

Ongoing Compliance Costs

Annual expenses for monitoring and maintenance estimated to be between $50\%$ and $70\%$ of the initial compliance costs.

Centralization

An operational structure focused on economies of scale that reduces the expense and time required to review process documentation for multiple separate departments.