WASHINGTON BOEING MAKING PROGRESS IN COMPUTER COMPLIANCE Progress made in computer compliance, Boeing says

Progress made in computer compliance, Boeing says

Boeing couldn't prove it could protect computers against manipulation, fraud

By ANDREA JAMES
P-I REPORTER

The Boeing Co. has told the Seattle P-I, in response to questions, that it is making progress on its Sarbanes-Oxley compliance testing in its information technology department, despite auditor turnover.

While the Chicago-based company won't disclose its full compliance status until it files its annual financial report, "We can say that for 2007, SOx testing is progressing well and we're making progress retiring certain issues previously reported by the P-I," the company said in an e-mail.

In July, the P-I reported that internal and external auditors had found deficiencies in Boeing's control over its computer information systems. The deficiencies meant that, for three years in a row, the company could not prove it could protect its computer systems against manipulation, theft and fraud.

The audit findings came as a result of the Sarbanes-Oxley Act, a federal law enacted after the Enron scandal, which was designed to prevent corporate scams. The law requires public companies to evaluate internal controls and prove that it has checks and balances on people andcomputer systems to guarantee accuracy of financial statements.

Boeing has always maintained that the financial information it has reported to shareholders is accurate. Although the company struggled with its information systems controls, compliance came easily to the company's finance teams, which monitor accounting and business operations controls, the P-I investigation found.

At Boeing, the responsibility of ensuring Sarbanes-Oxley compliance falls under Harry McGee, corporate controller. Boeing's corporate audit team, within the company's Office of Internal Governance headed by Wanda Denson-Low, does additional testing to ensure compliance. Under the law, a company's chief executive and chief financial officer are ultimately responsible, as they are the ones who sign their names to the company's financial statements and face criminal penalties if the information is wrong.

Several of Boeing's auditors and managers on the SOx effort have left the company or transferred to new units in the past several months, citing various reasons that included stressful working conditions in the department and better opportunities elsewhere.

Among those leaving is Audit Vice President Bob Jouret, who announced his retirement after having worked for Boeing for 30 years. He will leave his position Dec. 3 and officially retire in March.

Jouret's replacement, Kelvin Council, is currently the vice president of finance and chief financial officer for several groups at Boeing Commercial Airplanes, including 787, product development, and engineering and manufacturing.

When asked whether employee and auditor turnover affects Boeing's ability to complete its testing, the company responded: "It doesn't. SOx testing is largely performed by the control performers and overseen in part by contractors from PricewaterhouseCoopers."

Control performers are Boeing employees who work in the departments that are being audited and perform the processes that are being tested. PricewaterhouseCoopers holds a contract to assist Boeing with its internal audits. The company's external auditor is Deloitte & Touche.

SEATTLEPI.COM

To read the P-I's special report about Boeing's struggles with Sarbanes-Oxley compliance in its information technology department, see: seattlepi.com/boeing/sox/