The US Congress passed the Sarbanes-Oxley (SOX) Act in 2002 to protect people's interest against erroneous activities conducted by businesses and corporations. This act is aimed at increasing transparency in the way businesses perform financial reporting and encourage a standardized system of balance and check across all businesses.
SOX Compliance is not merely a legal necessity. It is a just business practice that urges businesses to act ethically and decrease access to internal financial systems. Moreover, adopting the SOX financial security practices protects your business against data theft or other kinds of cybercrimes. SOX Compliance covers similar parameters as most data security systems.
Before we move ahead, let's answer a simple question – what is SOX compliance? The SOX bill was drafted by Senator Paul Sarbanes along with Representative Michael G. Oxley. It was drafted in response to the many corporate scams that had been brought to light during that time. SOX Compliance was created with the objective of safeguarding investors by augmenting the accuracy and consistency of corporate discoveries. It brought forward a few important responsibilities for executives and board members of publicly listed firms. Additionally, it established criminal penalties if a business fails to comply with these responsibilities.
SOX Compliance affects all publicly listed companies. Additionally, it also applies to audit and accounting firms that work for organizations that fall under SOX.
SOX mandates all applicable organizations to participate in SOX audits every year. Organizations are required to make the results of these audits public to all stakeholders. Organizations appoint external auditors to conduct the SOX audits. The primary purpose of these SOX audits to validate an organization's financial records and statements. The appointed auditor verifies the presented data with the previous year records to make sure that everything is streamlined. They might also choose to hold one-on-one interviews with employees to make sure everything is as per the SOX requirements.
You need to keep four internal controls in mind while preparing for your Sarbanes-Oxley (SOX) Audit or SOX audit. Lets take a look at them.
There are four internal controls that you need to keep in mind while preparing for a Sarbanes Oxley audit. Let's look at each one of them.
This refers to electronic accesses such as login policies and controls and physical accesses such as locks, doors, and access cards. According to SOX Compliance regulations, no one should be given access to data or documents they don't need to perform their tasks.
The second control is security. This control checks your plan of action to prevent any possible data breaches. SOX gives you the liberty to independently decide how you wish to implement this control.
SOX mandates organizations to maintain appropriate backups for their financial data. This backup should be maintained at an off-site location.
SOX mandates organizations to appoint defined processes to maintain and add users into their system
While preparing for your SOX audit, you should keep the following SOX checklist handy to ensure you're not missing out on any essential point.
This sox compliance checklist will help you in avoiding any last minute hassles. Remember to refer to this sox compliance checklist every now and then to ensure you’re up to speed.
So far, this article has explained what SOX compliance is and how to be SOX compliant. But why do we need to be SOX compliant? Let's try and understand.
Now that we know the benefits of staying compliant with SOX and risks of being non-compliant, it is easy to recognize how critical it is to be proactive in this area. This is why it is always a good idea to seek expert insight and professional help to make sure everything is up to speed.
Professionals at TRC Corporate Consulting have years of experience in this industry and are equipped with the necessary knowledge to provide professional help on matters related to SOX. From every SOX audit to other SOX requirement, TRC experts can assist your business on every step of the process. Get in touch to know more about TRC's offerings.