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CEOs and CFOs facing significant consequences in 2007 says Deloitte |
 A focus on operational effectiveness of internal control will help to defend certification assertions
According to Deloitte, it’s no longer a question of best efforts and belief – for CEO’s and CFO’s compliance certification now means that they are saying in no uncertain terms that they are responsible for setting up and running processes and procedures to provide reasonable assurance regarding financial reporting. How do they effectively monitor, on a quarterly and annual basis, compliance with the control requirements they attest to in their certifications?
In answer to this question Deloitte feels that the focus in 2007 is
likely to move to operational effectiveness of internal control over
financial reporting. If they can’t defend their assertions or if they
prove to be incomplete or inaccurate CEO’s and CFO’s face “significant
potential consequences”.
They suggest that as the fundamentals
of CEO and CFO certification are here to stay two methods that may be
employed for sustaining awareness of and continuing adherence to
control obligations throughout the organisation are self-assessment and
sub-certification.
They point out that while smaller companies
may still be using manual methods for self assessment, larger
organizations may want to consider enabling technologies that automate
the self-assessment process and provide real-time efficient results
reporting.
In addition, self-assessment technologies will also
very often automate the action planning process to help facilitate the
monitoring of management’s action plans in response to identified
control gaps.
This information will often serve as a key input
into management’s ultimate conclusions with respect to the design and
operating effectiveness of controls.
Separate but complementary,
Sub certification cascades the actions providing comfort about the
control representations down from the top to various levels within the
organisation - a process which reinforces the accountability for
effective control beyond the CEO and CFO.
Taken together these two methods provide a powerful mechanism to strengthen and monitor disclosure and control practices.
In
addition to providing useful information to the CEO and CFO as well as
assistance to companies interested in addressing and sustaining their
control and certification requirements, they also provide comfort as
employees are regularly reminded that effective control is everyone’s
obligation and responsibility.
(Source - CEO/CFO Certification News, February 2007)
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