25 Oct 2021 Ankit Chadha

SOX Compliance: Requirements, Controls and Audits

SOX Compliance | TRC Corporate Consulting

In the year 2002, the US Congress passed the Sarbanes-Oxley Act to safeguard people’s interests against fraudulent activities conducted by big firms and organizations. The SOX Compliance or the Sarbanes-Oxley Act was implemented to encourage transparency and check the financial activities of the companies and businesses by tracking their financial reports.

SOX compliance is not just a legal obligation, but it is a strict business practice that motivates organizations to conduct an honest trade and operate fairly by decreasing access to internal financial systems. Moreover, the advantage of incorporating the SOX control and financial security practices is that it also protects your business against many cybercrimes such as internal data thefts.

What is SOX Compliance? 

To understand the requirement and importance of SOX compliance, you must first know the answer to this simple question, what is SOX compliance?

Senator Paul Sarbanes, along with Representative Michael G. Oxley, came up with this bill due to a significant increase in high profile corporate frauds at that time. This SOX compliance or bill aimed to protect the investors from being misguided or misled by corporates and firms. Thus, the SOX audit was one way to improve and enhance the reliability of the firms by providing transparent and well audited financial reports. In addition, the bill established several important duties and obligations for top executives and board members to follow while imposing criminal penalties if they failed to obey or abide by the responsibilities mentioned.       

SOX Compliance Requirements in 2021 

Now that you’ve understood the meaning and importance of SOX compliance, you need to understand the requirements under this bill. Thus, the SOX compliance requires:

  • The CFOs and CEOs of the publicly listed organizations to document and record their company’s overall financial activities in order to submit financial reports and internal control structure at the time of SOX audit. In case the respective authorities fail to abide by this SOX control requirement, they might have to face financial penalties and/or imprisonment depending upon different factors.
  • For the SOX audit, companies must produce an internal control report stating that internal management is responsible for maintaining a financial control structure. Any compromise or shortcoming should be brought to light timely to ensure precision and accuracy.
  • According to the SOX Act, having well-structured data security policies is a mandate for all companies and businesses. Moreover, SOX compliance also requires and demands a clear communication of these policies. By encouraging the companies to have these data security policies, SOX control ensures financial data safety, storage, and usage.
  • Lastly, SOX compliance requires firms and organizations to provide documented proof during the time of SOX audit to prove compliance.

Importance of SOX Compliance Controls and Audit 

The SOX Act has made it compulsory for companies and organizations to execute their yearly SOX audits and make those results easily available to stakeholders and potential investors. You can partner with TRC Corporate Consulting to hire efficient auditors, who can perform the complete SOX audit for your company. This audit is essential as it approves and verifies your company’s financial statements. In addition, our external auditors will also interview and discuss with your personnel to verify that the compliance controls are adequate to meet the SOX compliance benchmarks or not.

There are four controls that you need to keep in mind while preparing for SOX audit. The auditor will scrutinize these four internal controls as a part of the yearly audit. Demonstrate your company’s capability in these following controls to be SOX compliant:

  1. Access: When the auditor wants to examine access, it intends to check electronic and physical controls implemented by the company. Electronic controls such as login policies, whereas physical controls like access to doors, locks on file cabinets, etc. In order to be SOX compliant, a company must only give access limited to the requirement.
  2. Security: To demonstrate SOX compliance, a company must have sufficient protection against its sensitive data. This control checks if you have a structured, well-planned set of actions to prevent possible data breaches. However, you have the freedom to decide how you want to implement this control.
  3. Data Backup: It is compulsory for a company to have off-site back-ups for all their financial records to be SOX compliant.
  4. Change Management: Your company or organization must have a well-defined process to add or maintain operators, install new software updates, and make changes to databases or functions that oversee your company’s finances.

Detailed SOX Checklist 

A SOX compliance checklist helps you prepare well in advance for SOX audits. With the help of this quick checklist, you can ensure that you’re not missing on any essential requirement to be SOX compliant:

  • Make sure that you have maintained a proper SOX compliance report. It would be best if you practice maintaining these reports on a regular basis, as trying to work on them at the last minute can be problematic and time-consuming.
  • Support and assist auditors by providing them access to everything they need to conduct the audit competently
  • Report a security breach (if any) beforehand to enable transparency and protection.

If you follow this SOX compliance checklist, you won’t face any last-minute contingency.

Why Choose TRC Corporate Consulting For SOX Advisory Services? 

By understanding the significance of being compliant with SOX Act and the disadvantages of being non-compliant, you can now very well address the importance of staying proactive in this area. However, it is always beneficial to seek expert insights and specialized help to ensure everything is up to the mark.

The professional consultants at TRC Corporate Consulting have years of on-field experience in this industry and are equipped with vital bits of information to provide professional help for SOX compliance related concerns. From every SOX audit to other SOX requirements, partnering with TRC Corporate Consulting will only assist your business to prosper and flourish.