For a good look at how companies are preparing for the approaching blizzard of new accounting regulations, consider the changes underway at Solectron Corp. As with other companies, the internal audit function at the $11 billion technology equipment manufacturer has been put on steroids. The job of overseeing financial controls used to be spread out over a full year. Not anymore. The workload has been thoroughly overhauled so that it is completed by the end of the second quarter to give time for problems to be identified and corrected ahead of the external auditor's reviews, which also must allow time for corrections. Non-financial testing is now concentrated in the last two quarters.

Norman Marks, Solectron's vice president of internal audit, says the company uses a mix of its own staff and outside consulting hires to get the bulk of the financial testing done–a job that, because of the range of specialties needed, requires the services of six outside consulting firms. "I've got to double staff at times in the first half of the year, so it has dramatically changed that," says Marks. All this, despite Solectron's August fiscal year end, which puts it in the company of a select few who do not need to comply with Sarbanes-Oxley's Section 404 internal reporting requirements until about eight months after most companies do.

The realignments underway at Solectron are no different from what's occurring at many other companies, both large and small. Old ways of planning, testing and confirming accounting policies and procedures are giving way to cobbled-together approaches to SOX compliance. But in the eleventh hour rush toward compliance with a new law for which not even all the regulations have been finalized, no function has been more profoundly transformed than auditing. "With Sarbanes-Oxley, 2004 is going to be really a challenging year," says Patricia Scipio, treasurer and member of the board of directors at the Institute of Internal Auditors. "There are still a lot of gray areas out there. I think external auditing firms too are struggling significantly because they are the ones who have to attest to it."

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