The Sarbanes-Oxley Act requires U.S. public companies to evaluate and disclose the effectiveness of their company’s internal control over financial reporting, and also requires external auditors to confirm and attest to the effectiveness of their clients’ internal control over financial reporting. Chief executive officers and chief financial officers also must certify to the effectiveness of their company’s internal control over financial reporting and the reliability of the company’s financial results.
In 2002, in response to several corporate accounting scandals that eroded shareholders’ confidence, the United States Congress enacted the Sarbanes-Oxley Act (SOX), one of the most significant changes to the nation’s securities laws in decades.
Since SOX was passed into law, Arrow Electronics has viewed the Act as an opportunity to continue its ongoing efforts of simplifying, centralizing and standardizing financial processes across the company.
“Arrow has been in full compliance with Sarbanes-Oxley since the law’s inception, and that is partly due to the company’s long history of maintaining an effective, internal control environment,” says Anthony Pappone, manager, Sarbanes-Oxley Compliance, Arrow. “In addition to becoming a new corporate baseline, SOX also provides Arrow with a competitive edge by providing investors with confidence in Arrow’s financial results.”
Conservative Approach
The company always had effective internal control over its financial reporting, in every country and in every organization. Similar to many companies reacting to SOX regulations as they were first implemented in 2004, Arrow targeted a very wide scope of financial activities and devoted many resources to the SOX compliance process. Since the year of inception, however, Arrow has honed its SOX-related reviews to focus on key areas that truly impact the company’s control environment.
“Within the first year, SOX was wrapped into the overall company fabric, day in and day out, and because of our employees’ continued efforts to standardize our processes and related controls, we achieved an increased consistency in our approach of ensuring compliance across all Arrow organizations, around the globe,” recalls Pappone. “This information is helping our leadership make informed decisions every day, not just when year-end reports are final.”
These decisions are contributing to the company’s – and its shareholders’ – bottom lines.
Several factors contributed to Arrow’s exemplary internal control environment and related processes, and to the company’s successful SOX implementation and continued compliance:
- From the outset, corporate leaders across the business agreed to, understood and committed to the scope of SOX processes across the entire company.
- A formal procedure to identify, assess and quickly remediate non-complying processes was initiated.
- And by successfully partnering with each of the company’s operating units, the corporate audit department and SOX managers throughout Arrow were able to minimize disruptions to business operations, educate and train personnel, and communicate clearly across working groups about roles and responsibilities.
Ongoing communications between the corporate audit team and Arrow’s external auditors also have cut the costs and time associated with ongoing SOX compliance activities. |
As the release of new SEC guidelines and PCAOB (“Public Company Accounting Oversight Board”) standards approaches, Arrow continues to be well positioned for whatever new regulations may be required of the company.
“The effective synergy of Sarbanes-Oxley activities into the company’s corporate environment has made Arrow stronger,” Pappone says.
Arrow’s focus on continuous process improvement, ethics, integrity, operational effectiveness, openness and transparency to customers and the market, have a direct correlation to Arrow’s SOX process.
“The information is at our fingertips in a more consistent manner, to react to the needs of our customers, and to continue to comply with all corporate governance regulations,” he explains. “Arrow’s continued SOX compliance is one of our most valuable assets – it says we’re a company in which you can rely, as an employee, customer, supplier or as a shareholder.”
