Sarbanes Oxley has absolute requirements for reporting, review and managing compliance. Benchmarks show organizations spend up to 50% of revenue for goods and services.Most organizations still do not have efficient means for even capturing basic information about their total spend

1. Inadequate Spend Analysis Capability
Putting Fortune 100 Companies at
Compliance Risk
Sarbanes–Oxley Section 404: Assessment of internal control
Requires companies to report on the adequacy of there internal controls.
Given companies typically spend up to 50% of their total revenue on materials
and services and without a way to effective capture, review and monitor spend
are at risk of non compliance which can result in significant penalties and even
criminal liability.
Bill Kohnen June 2015

2. Summary
• Sarbanes Oxley has absolute requirements for reporting, review and managing
compliance
• Benchmarks show organizations spend up to 50% of revenue for goods and
services
• Most organizations still do not have efficient means for even capturing basic
information about their total spend
• Regulators are likely to be less lenient with accepting that companies are
challenged to capture more detail on spend as material purchasing and supply
chain issue increase and given there are relatively low cost easy to put in place
solutions available
Bill Kohnen June 2015

3. Under Section 404 of the SOX Act, management is
required to produce an internal control report that:
• Affirms the responsibility of management for establishing and
maintaining an adequate internal control structure and procedures
for financial reporting
• Provides an assessment, of the effectiveness of the internal control
structure and procedures
Achieved by adopting an internal control framework such as that
described in COSO.
Bill Kohnen June 2015

4. Committee of Sponsoring Organizations of the
Treadway Commission (COSO)
Internal control and framework objectives cover
•Effectiveness and efficiency of operations
•Reliability of financial reporting
•Compliance with applicable laws and
regulations.
•Safeguarding of Assets
All RELAVANT TO PURCHASING AND SUPPLY CHAIN
Bill Kohnen June 2015

5. Internal control framework consists of five
interrelated components
•Control Environment
•Risk Assessment
•Control Activities
•Information and Communication
•Monitoring
ALL RELAVENT TO PURCHASING AND SUPPLY CHAIN
Bill Kohnen June 2015

6. Purchasing Controls up to 50% of Revenue
• It is common for Purchasing Leaders at organizations to say they still do
not have full visibility for spend and transactions across their organizations
• A recent review of job postings for Purchasing Spend Analysts for major US
companies shows Excel spreadsheet and Power Point skills as among the
top requirements
• So far organizations have been able to “get by” by reporting very high level
spend information that is not really actionable while demonstrating
“control” because of signature approvals.
THIS WILL NOT BE ENOUGH IN THE FUTURE
Bill Kohnen June 2015

7. What Needs to Be Done?
Organizations must put in place a comprehensive process for
spend analysis
• It needs to be more than spreadsheets and manpower
• You can built your own capabilities but this is expensive to develop and
maintain while not keeping up with best practices
• Cloud based Software as a Service solutions typically have a quick
implementation time and are relatively low cost vs. risk of non
compliance
GOOD NEWS:
In the hands of Purchasing and Supply Chain Professionals the spend analysis
information data will enable savings ranging from 10% to 30% which will result in
a fast ROI for any cost associated with the spend analysis solution.
Bill Kohnen June 2015