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Oversight Systems Inc.

Oversight Systems Inc. has released Oversight 4.2, which it says extends its automated continuous monitoring for corporate equity management and stock option grants.

Building on the earlier success of monitoring procure-to-pay, order-to-cash, financial accounting and capital projects, Oversight 4.2 continuously monitors the transactions and activities in human resources and stock option administration systems to ensure compliance in every step involved in the process for granting, executing and accounting for employee stock options.

"The recent headlines of backdating and manipulating stock option grants have incited increased attention from auditors and regulators," said Patrick Taylor, CEO of Atlanta-based Oversight Systems, in an announcement. "Oversight provides the complete solution for companies to certify the compliance of their employee stock option programs."

Typical controls over stock option compensation are mostly manual because the process involves heterogeneous systems and multiple sources of information. Oversight "provides automated controls across all systems involved in the entire equity compensation process," the company says. Oversight integrates directly with equity management systems, HR systems and the general ledger to identify discrepancies, such as:

* vesting dates that are inconsistent with employment or grant dates;

* grant dates that fall outside of board meetings;

* strike prices that vary from the stock price on the grant date;

* grant dates that precede an employee's hiring;

* unqualified options exercised without the required withholdings for tax and FICA;

* journal entries for options expenses that differ from the equity management system; and

* exercised options without a corresponding journal entry.

Taylor said in an interview that the monitoring system needs to examine HR systems, financial systems, the general ledger and possibly stand-alone applications from software providers like Equity Edge and Boardroom Software. Most of these are designed with an ease of manipulation and with the notion of making updates easier--but that can also make them easy to alter.

"You need to run analytics that are thinking about a four-year period or more" in which options may be in question, he says. Oversight's system can generate exception reports, as well as permit customers to work through a user interface.

Oversight's platform automates the life cycle of finding problems in business processes, fixing those problems and proving problems were resolved. Oversight identifies errors and control violations, drives defect-free processes and sustains Sarbanes-Oxley compliance.

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Publication:Financial Executive
Date:Nov 1, 2006
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