SOX as it relates to physical inventory and assets......? 884



  • We are a 3rd party technology integrator. Computer equipment is purchased by companies, shipped to us from the computer company, and we install software, hardware, etc. We customize it and then deploy it (sometimes immediately and sometimes months later).
    Recently there has been a push to remove the customer’s inventory from our facility and get it into one of the customer-owned locations. As well, this customer is not paying invoices to the computer hardware vendors until the equipment hits the dock of one of the customer-owned facilities.
    All of this activity is cited as an effort to be compliant with SOX. However, none of the SOX material I’ve read (which is a little over my head) talks about these issues.
    I’m confused.



  • Hi there,
    There is no SOXA documents covering specific aspects of logistics or accounting rules implemented by customers. The only reference we all got is that management is responsible to ‘create and maintain the internal controls that ensure fair and timely financial condition represented in the financial statements, to assess the design and effectiveness of the internal controls and to disclosure the significant deficiencies and remediation plans, to have public accounting firms certifying the management assessment’
    Around this constraint, you need to see whether your organisation have the appropriate controls that enables the preparation of the financial statements: the move of the customer’inventory from your location may be one of the controls management decided to have in order to avoid commingling with your onw inventory? though you might very well keep customer inventory close by by keep a regular physical counting…
    The recognition of revenue depends on the terms you are applying between you and customers. It might well be that transfer of property only happens once the goods reach the customer facility (DDU, DDP…)
    I hope it clarifies.



  • We are a 3rd party technology integrator. Computer equipment is purchased by companies, shipped to us from the computer company, and we install software, hardware, etc. We customize it and then deploy it (sometimes immediately and sometimes months later).
    Recently there has been a push to remove the customer’s inventory from our facility and get it into one of the customer-owned locations. As well, this customer is not paying invoices to the computer hardware vendors until the equipment hits the dock of one of the customer-owned facilities.
    All of this activity is cited as an effort to be compliant with SOX. However, none of the SOX material I’ve read (which is a little over my head) talks about these issues.
    I’m confused.
    Sounds like typical SOX being used as a big stick to achieve something else.
    There is no specific SOX issue in relation to the situation you describe. There is, however, a significant CASH FLOW issue to the hardware vendor i.e. the sooner the equipment gets on site then the sooner they get paid.
    However from a financial statements (i.e. SOX) point of view in one scenario the vendor has receivables or inventory and in the other they have cash in bank. So long as the transaction is correctly recorded SOX does not care where the hardware is or how quickly it gets to the customer.


Log in to reply