What's Missing From Your SOX Compliance Program?
Is the ever-increasing demand for audit talent, combined with workforce trends, leading companies to rethink their talent strategy when it comes to Sarbanes Oxley Compliance? We think so, but if you are still trying to go it alone, or with limited external assistance, you might consider revisiting this approach. The Millennial effect (job hopping), the rising “gig” economy (offering choice, variety and flexibility), low unemployment and increasing demand for quality accounting and auditing professionals (growing faster than the average of all other occupations), are all factors pointing to an escalating opportunity to outsource or increase co-sourcing.
In this post, we further explore the case for Sarbanes Oxley outsourcing by looking at the current environment around 3 areas of consideration: Is the function conducive to outsourcing? Is it difficult to attract talent in this area? Is it costly to maintain the technical and specialized resources to be effective?
Is the function conducive to outsourcing?
Of course, each company has its own defining core competencies driving its product or service offering. However, if a function can be extricated from that unique identity and has some standard, repeatable elements that are applicable across different organizations, it may be suitable for outsourcing. Payroll is an easy one – no matter how unique your company, Payroll is a fairly standard process with common requirements across organizations. Sarbanes Oxley compliance is obviously broader and may be more complicated than Payroll processing, however it still has a strong case for outsourcing with commonality across organizations in a few areas such as:
Annual life cycle of the compliance program
Internal control framework used (COSO)
Process and control documentation requirements
Control testing and conclusion procedures
Of course, financial systems and processes vary among companies but a provider has likely seen a variety of them, enabling them to efficiently gain an understanding of a client’s environment and offer insights based on their specialized expertise and broad perspective.
Is it difficult to attract talent in this area?
Do a Google search for an Internal Auditor, IT Auditor or jobs containing the words “Sarbanes Oxley” and, depending on where you are, there are likely to be numerous opportunities. Mid-level auditors with a CPA, CIA or CISA, and public accounting experience are in high demand. This may leave a talent gap in many organizations, that must often compensate by hiring less qualified internal candidates and providing more training, using internal guest auditor programs, and/or engaging consultants. Finding highly qualified “doers” who are knowledgeable, experienced and want to do this highly technical work for one company as a full-time employee is a challenge that is not going away. According to the Bureau of Labor Statistics, demand for both accountants and auditors is expected to rise 10 percent through 2026, faster than the average across all occupations.
The breadth of experience gained from a firm, could be exponential to that of a full-time employee or contractor. If you are working with a small to mid-size firm, you are likely getting a more experienced practitioner as your “doer” who can execute at a high level of quality and efficiency and can offer broader perspective based on interactions with numerous clients and external auditors.
Is it costly to maintain the in-house technical and specialized resources to be effective?
Sarbanes Oxley requires significant technical knowledge in financial accounting, financial statement risk and the impact of financial systems, process and controls in all financial process areas. Highly qualified practitioners in this space often have professional designations such as a CPA, CIA, CISA which demonstrate a depth of knowledge and commitment to their expertise. This knowledge and expertise can come at a high cost, at a time when the cost of full time employees is increasingly expensive. Among U.S. employers, salary budgets are expected to grow by 3.2% in 2018, up from a 3.1% increase in 2017, according to the Economic Research Institute. Add to this the cost of employee turnover, which is more prevalent among the millennial workforce. A May 2016 Gallup News article titled “Millennials: The Job-Hopping Generation” states “Millennials have a reputation for job-hopping. Unattached to organizations and institutions, people from this generation -- born between 1980 and 1996 -- are said to move freely from company to company, more so than any other generation.” (Amy Adkins, Gallup). And replacing a highly paid employee at a more senior level could cost over 200% of their annual salary, according to analysis by the Center for American Progress. At the same time, the workforce is increasingly opting for the choice, variety, and flexibility offered by the “gig” economy. In fact, a 2015 Forbes article “Intuit: On-Demand Workers Will More Than Double By 2020” predicts that by 2020, 40 percent of American workers will be independent contractors and a January 2018 article by NPR “Freelanced: The Rise Of The Contract Workforce”, indicates that “Within a decade, many labor economists believe freelancers will outnumber full timers.” (Yuki Noguchi, NPR).
With an economy at low unemployment, a competitive demand side environment and workers increasingly choosing the “gig” economy over a full-time, in-house position, companies often turn to expensive recruiting firms to source full time candidates.
Opting for an outsource provider can minimize the high cost of turnover and recruiting of full time employees, while potentially providing more continuity than FTEs and contractors, maximizing productivity and enabling more predictable and scalable costs.
As you evaluate the right mix of resources to meet the needs of your organization’s Sarbanes Oxley compliance program and consider the trends in the workforce, remember the benefits of outsourcing or co-sourcing to overcome staffing challenges and reap the benefits of:
Access to broad perspective
High quality execution from experienced and knowledgeable practitioners
Increased continuity in a changing labor landscape
Stability and scalability in service and cost
Finding the right partner is critical. For more information on how Bullpen Financial is helping companies realize the benefits of outsourcing and co-sourcing their Sarbanes Oxley Compliance programs, visit https://www.bullpenfinancial.com and contact us at info@BullpenFinancial.com.