Guide To SOX Compliance

 

Growing incidents of unethical financial practices and increased risk of unauthorized corporate and financial disclosure in the industry was the driving factor behind the establishment of SOX Compliance. Today, achieving SOX compliance is seen as an industry best financial practice for maintaining a good data security standard.

The Act was introduced to bring in a major reform in the security and governance of financial disclosure and further gain public trust and confidence over an organization’s auditing and financial reporting. The standard aims to govern the financial operations, disclosures, and contracted financial services against any unethical practice. Elaborating on the requirements of SOX compliance, we have shared some tips that can help organizations like you achieve compliance. But before heading straight to the compliance process, let us first learn a bit more about SOX Compliance.

Table of Contents

• What is SOX Compliance?
• How can you prepare for SOX Compliance?
• SOX Compliance Checklist
  • Data Classification & Monitoring:
  • Financial Reporting:
  • Maintaining Data Accuracy:
  • 
    

What is SOX Compliance?

The Sarbanes-Oxley Act which is also popularly known as SOX Compliance is a standard that protects clients and stakeholders from fraudulent financial activities and disclosures. The SOX Act outlines compliance requirements for organizations to adhere to and ensure secure business practices.

The objective behind enforcing SOX compliance is to improve the accuracy and reliability of financial activities and the corporate disclosures. Achieving SOX compliance is not just a mandate by law but is also seen as a good business practice adopted by organization. Public traded companies including foreign companies, subsidiaries, accounting firms that audit public companies, and companies that have business in the United States are required to comply with SOX. Non-compliance to SOX Act can result in hefty fines and penalties.

How can you prepare for SOX Compliance?

Achieving SOX Compliance can be challenging but if planned and executed well can be achievable for your organization. Having in place appropriate security controls and requirements outlined in SOX is crucial. This will help maintain accurate financial data, prevent unethical practices and unauthorized disclosure. However, achieving SOX Compliance requires adopting best practices and using appropriate tools for addressing compliance challenges.

Further, your organization will have to update the internal audit process and document the reports as evidence for auditors when they request for the data, to verify whether your organization is SOX compliant. For your organization to be SOX compliant, you will need to ensure having in place or measures and requirements outlined in the SOX requirement. So, here are some ways how your organization can ensure achieving and maintaining compliance.

SOX Compliance Checklist

Data Classification & Monitoring:

Your organization should have a data classification process in place to determine the location of the sensitive data and also those having access to such data. You need to have remediation plans in case of an incident occurrence to effectively manage the risk promptly. Further, your organization will likely need you to establish strict policies and procedures along with an effective auditing and monitoring process to keep a tab on user interactions.

Financial Reporting:

Section 309 requires your organizations to periodically file and review the financial statements and the internal control structure with the Security and Exchange Commission. The top management of your organization is responsible for the accuracy of the data in the financial reporting and the internal control structure. They are responsible for ensuring that the financial data is fairly presented and does not contain any misrepresentation. For ensuring compliance, you must maintain a regular and updated SOX compliance status report which should also be handy for the SOX audit.

Maintaining Data Accuracy:

Section 401 calls for the accuracy of financial data. As per SOX Compliance, every public company is required to periodically file and review its financial statements. Your financial statements should be accurate and not contain any incorrect statements or misleading statements. So, having in place measures and processes to secure the financial data and prevent the tampering of the financial data is crucial.