Over the last few months, I have written about materiality and how it is important from a SOX perpective. Since the inception of AS5, materiality questions become all the more important. Organisations which have multiple locations, subsidaries may find it beneficial to consider materiality not only at the SEC reporting level, but also use thier own judgement to consider what is material and significant to their own business. How does then one assess materiality. A simple way of doing this is to look at quantitative and qualitative aspect at the component level.

Management should look at assume that an individual component like a location or subsidiary is material and then look at how any deficiencies should be remediated. Obviously, the amount of time and effort spent by management on aggregated deficiencies will always be more, but it will help management to look at individual components more closely. Once deficiencies are identified at the component level, management can then decide how these impact the overall SOX environment and whether any remediatory measures need to be taken. One thing is clear the overall SOX game has reached a maturity level. SOX is not just complying with regulations but looking at how an organization can better their controls. The more effort management takes for enhancing controls, the more benefits it will reap in the long run.

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