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For smaller companies, less complexity can
mean lower costs in the CEO/CFO certification process
Excerpted from the
Deloitte CEO/CFO Certification News
If there is one lesson to be learned from CEO/CFO certification
compliance, it is that one size does not fit all. And nowhere is this lesson
more telling than in smaller businesses working to comply with the
requirements.
By their very nature, smaller companies are more likely to have limited
financial resources to address compliance and are more likely to be faced
with such internal control challenges as a lack of segregation of duties and
management override due to the hands-on role of their CEOs and CFOs.
Smaller companies face significant challenges in complying with the
existing requirements of certification. To address these challenges, smaller
issuers should develop a certification strategy that considers the
requirements in the context of the company’s size, structure and complexity.
Given the experience of large companies that have been working to address
the certification requirements, compliance may be perceived by many smaller
companies as an almost insurmountable hurdle, from both a financial and
resource allocation perspective. The opportunity exists, however, to
leverage unique attributes of a smaller business to address compliance in a
practical and cost-effective manner.
While a streamlined approach to certification may seem appealing from a
cost perspective, there is some concern that this type of approach may
hamper an organization’s efforts to fully comply with the requirements. The
reality is that it is possible for smaller companies to be fully compliant
while adopting a streamlined approach – as long as they rely on a proven
methodology and appropriately consider where customization is required.
Ultimately, the end game of CEO/CFO certification is the same for all
organizations, regardless of size: increased accountability, quality and
reliability of financial reporting. By adopting proven methodologies for
compliance, while tailoring their compliance approach based on risk,
companies of all sizes will be better positioned to certify as to the
effectiveness of their ICFR.
In closing, smaller companies should not fall into the trap of
implementing a large company approach. The result will likely be excessive
compliance costs and an approach that is not sustainable for the
organization. Furthermore, it could be argued that, without an approach
designed specifically for a smaller business, its unique attributes and
inherent control challenges, compliance risk may not be effectively
mitigated regardless of the compliance costs incurred. As a result, smaller
companies should carefully evaluate their planned compliance solution for
its practicality, fit and sustainability.
Read
the full article
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