Title

The Role Of Strategic Enterprise Risk Management And Organizational Flexibility In Easing New Regulatory Compliance

Keywords

Control environment; Enterprise risk management; Internal control; IT compatibility; Management control systems; Organizational flexibility; Sarbanes-Oxley Act

Abstract

The impact of new regulatory requirements for internal control reporting on an organization's ability to maintain strategic flexibility has been debated in the popular press extensively. This paper tests theory from strategic management to examine the relationship between an organizations' pre-regulatory strength of strategic enterprise risk management (ERM) processes and their ability to react to new regulatory mandates. In the context of companies' adoption of SOX Section 404 internal control reporting requirements, we examine organizations' pre-SOX ERM processes, ERM supporting technologies, and organizational flexibility in order to better understand the antecedents to the difficulty encountered in meeting SOX 404 requirements. Using responses from 113 Chief Audit Executives (CAEs), we find that organizations with stronger strategic ERM processes and flexible organizational structures already in place incurred little difficulty in implementing SOX 404 mandates. On the other hand, organizations using weaker ERM processes, which focused on control compliance, experienced more difficulty. These findings provide key insights into the importance of strategic ERM in effectively complying with new regulatory controls in volatile environments. © 2011 Elsevier Inc.

Publication Date

9-1-2011

Publication Title

International Journal of Accounting Information Systems

Volume

12

Issue

3

Number of Pages

171-188

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1016/j.accinf.2011.02.002

Socpus ID

80052095110 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/80052095110

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