5 Myths About Compliance Programs (Myth #5)

The final myth in our series is the myth that compliance programs can be outsourced. While it is very true that a significant portion of compliance activities can and in many instances should be outsourced, the core leadership and direction of the program cannot. The ultimate responsibility for compliance lies with the executive management and, to a certain extent, the Board of Directors. The quarterly certification related to internal controls over financial reporting required by Section 302 of the Sarbanes-Oxley law is one of many explicit reminders that responsibility for the effectiveness of the compliance program cannot be outsourced. The recent trend of regulators like the SEC requiring that companies admit wrong-doing as well as pay fines (versus just paying fines in the past) is another indication that regulators, and indeed the public, are demanding more accountability. The recent NHTSA maximum fine levied against General Motors with likely criminal charges to follow is an example of such accountability demanded related to compliance requirements outside of those of financial reporting.

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5 Myths About Compliance Programs (Myth #4)

Those of us who have spent time in internal audit have a love/hate relationship with the Sarbanes-Oxley Law (SOX). On the one hand, managers were agreeable to implement internal controls that we felt were important all along because these now “had to be done for SOX”. On the other hand, many internal control procedures that are important but not related to financial reporting suddenly were unimportant because they were “not related to SOX”.

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5 Myths About Compliance Programs (Myth #3)

The leaders of compliance functions strive for excellence. It is proper that corporate leaders place an enormous amount of trust in these leaders. These functions can and should advise on the components of the compliance programs and program improvements over time. It is proper that compliance teams provide guidance, experience and expertise.

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5 Myths About Compliance Programs (Myth #2)

Compliance is a burden. If we can just eliminate all of the red tape, the American economy will take off. Excessive regulation is keeping the unemployment rate high. We frequently hear these outcries from politicians, television news, and some corporate leaders. This chorus gave rise to and reinforces the notion that compliance forces business leaders to take their “eye off the ball”.

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5 Myths About Compliance Programs (Myth #1)

Compliance programs have always been an aspect of corporate structures. With the passage of the Sarbanes-Oxley Act in 2002 (SOX) and subsequent pronouncements and guidance, especially from the PCAOB, formal compliance programs became a fact of life for all in U.S. publicly traded companies and those companies striving for the day of their IPO. As we near the 12 year anniversary of the passage of SOX, let’s explore 5 myths about compliance programs that have largely precluded most companies from leveraging compliance.

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