Adapting an acquired company to SOX methodology 2017

  • We recently purchased (late 2006) a company that uses a SOX tool that appears to be superior to the MS Word/Excel approach that the parent company is employing. In an effort to apply a uniform approach to SOX documentation and testing, is it reasonable to request that this company adapt to the parent company’s more simplistic methodology? Does it make sense to implement the project one way for 7 subs and allow this location to document in a unique manner?

  • Despite the fact that their software may appear useful on the surface, Group Policies should be consistent for SOX and it is vital to successful acquisitions that processes are integrated with the Group on a timely basis.
    I would assume that it is cheaper to continue the current method rather than having to buy licences for every entity?
    As such, unless you are already managing SOX on an entity by entity basis (as opposed to a centralised team), it would make more sense for your acquisition to change to the simplified method.

  • Bear in mind that the acquired company can be regarded as out of scope in the year of acquisition.
    Would there not be value in moving the parent to the superior method?

  • The company was acquired in 2006 and will therefore be in scope for 2007. It’s my understanding that had we made the acquisition anytime on or after 1/1/07, it would not be subject to 404 testing until 2008.
    There could be value to adopting the tool being used by the subsidiary location, but based on feedback I’ve received from our CFO, he’s not in any hurry to move to a software solution for our SOX effort. We’re a non-accelerated filer and want to see what happens in our first year of filing before making any decisions of this nature. Personally, I think it would have helped having a tool in place all along, but the project has not been regularly managed since its inception and I’ve been here only long enough to start picking up the pieces and making this puzzle work.

  • If the new subsidiary has identified the right risks and controls, then what harm is it to let them continue to use their software? You should just require them to report information in to you as do your other subsidiaries. It may be easier for them to continue to use the software and provide summary information to you than to change. This also may be a good way to convince your CFO that a better method exists than what you currently employ. You already have your test market up and running.
    While I am all for standardization, I always hate to throw something away that is adding value. If you determine that continued use of the software is not efficient for your organization, then you can make the informed decision to dump it.

  • I agree with Mike. There’s no value in having the acquired company dumb down just to standardise.

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