In 2002, the US Congress passed the Sarbanes-Oxley (SOX) act to protect the people from erroneous practices conducted by corporations and businesses. This act aims to increase transparency and clarity in the way corporations conduct financial reporting and promote a formalized system of checks and balances in all corporations.
SOX Compliance is more than just a legal requirement. It is a fair business practice that encourages companies to behave ethically and reduce access to internal monetary systems. Aside for this, adapting SOX financial security gives your business the side benefit of protection against data theft or cyber-attack. Essentially, SOX Compliance encompasses several similar practices as most data security checks.
Let’s begin by answering a simple question – what is SOX compliance? This bill was written by Senator Paul Sarbanes and Representative Michael G. Oxley. It was created in response to numerous high-profile corporate scams that came to light. SOX Compliance originated with the goal of protecting investors by enhancing the consistency and accuracy of corporate discoveries. This bill brought forward a set of responsibilities for board members and officers of publicly listed corporations. Moreover, it also put criminal penelties in place in case a business fails to comply with these norms.
SOX compliance applies to all publicly listed companies. SOX also applies to audit companies and accounting firms that work with companies that fall under SOX.
SOX requires all applicable companies to take part in audits on a yearly basis. The results of these SOX audits are supposed to be made public to all stakeholders. Corporations bring on board independent auditors to perform the SOX audit. The fundamental purpose of these audits is validation of a company’s financial records and statements. The auditors tallies the present data with that of previous years to decide if everything is streamlined. These auditors can also choose to hold one-on-one interviews with particular employees to ensure everything is aligned with 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.
Access refers to electric controls such as login policies & permissions and physical controls like doors, locks and badges. As per SOX compliance requirements, no person should have access to documents and data they don’t necessarily require.
Security refers your plan of action to prevent data breaches. SOX gives freedom to decide how you wish to implement this.
SOX requires you to maintain compliant backups of your financial data. This backup needs to be maintained off-site.
SOX requires you to have defined processes in place to maintain and add new users in your systems.
It’s always a good idea to have a SOX checklist handy while preparing for your SOX audit. Here a few points that you can be a part of your SOX checklist.
So far, we have understood what is SOX compliance and how to be SOX compliant. But why do we need to be SOX compliant? Let’s find out.
After looking at the benefits of complying with SOX and the risks associated with non-compliance, you would have understood how critical it is to be mindful in this area. It is always advisable to seek expert help to make sure everything runs smoothly and your business stays compliant. Professionals at TRC Corporate Consulting are trained and equipped with the necessary knowledge to provide expert assistance related to SOX compliance. From SOX audit requirement to compliance metrics, the experts at TRC can help your business with SOX compliance. Get in touch to know more.
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