In 2002, the US Congress approved SOX (Sarbanes-Oxley Act) and formed regulations to safeguard people from malpractices that some companies do. The act aims to make a company’s financial reporting more transparent. The law also wants corporations to need a formal check and balances system in every enterprise.
This act is not only a legal compulsion but also a decent method of doing business. Every business owner should involve fair business practices and restrict the authority to operate finance services. But there is one more benefit of SOX compliance. It helps to secure essential business documents from hackers. It can include many processes that other data security software can. Here’s a practical guide on internal controls for SOX compliance.
SOX compliance applies to all companies that perform business with the population in the USA. Audit companies that perform financial accounting also need to meet SOX compliance.
Private businesses, NGOs, and non-profitable organizations are not bound to SOX obligations. But if private firms present any false financial information, then this law can punish them. In that case, SOX compliance is required for private organizations that want to start an IPO (Initial Public Offering) before approaching the population.
Needs of SOX Compliance
Some essential requirements for SOX compliance are listed below:
- The company CEOs and CFOs are directly accountable for preparing documents correctly and submitting all financial records to the SEC with their internal control structure. Authorities can be penalized or sent behind bars if they breach SOX regulations.
- A proper data security plan is a must to comply with SOX. Therefore, organizations must create a comprehensive data protection policy that safeguards all financial information used during regular functions.
- SOX needs that enterprises offer and maintain proper documents that evidence that they are following SOX regulations.
Audits related to SOX compliance
The enterprises that have to comply with SOX requirements conduct audits at the end of every financial year. Independent auditors are hired so that SOX audit could be an individual one than the other audits. Stakeholders can see the audit results whenever they want.
Initially, a SOX audit is necessary to check the financial records of the companies. A comparison is made between the current and past papers to decide whether the statements are realistic. Even the auditors can query account staff to check whether SOX regulations are followed.
How companies can prepare for a SOX Compliance Audit
For SOX compliance audits, companies need to update internal auditing facilities and their reporting to show any statement to the auditors as per their demand. Check and ensure that your SOX compliance software is functioning as desired so that you do not need to face any challenges.
Internal Controls SOX Audit
The auditors you will hire for the SOX audit will verify your four internal management as a process of SOX annual audit. Businesses have to exhibit their capacity in the management to meet SOX compliance requirements that are mentioned below:
- Access controls: Access management means physical checks like badges, doors, files, cabinet locks, etc., and system management includes limited login access, permissions for auditing, minimum privileged access to sensitive files. Try to have an access management model that is minimal permissive. It means your staff can access the files till it is required to complete their tasks. It is also a necessity to comply with SOX requirements.
- Security controls: Security checks mean your systems are adequately prepared to prevent hackers. The way you will select to use security tools is entirely your decision.
- Backup for financial records: It is a must to have backups for all your financial documents.
- Alter controls: Get distinct practices to include and handle users, download new applications, and alter databases or solutions that manage your company’s financial records.
Compliance Software advantages for a SOX audit process
Data-oriented software protection medium is one of the best methods to explain that you comply with SOX regulations. The latest data-protection mediums can support you address permissions concerns, identifying and tagging your critical finance files, and securing files from malware attacks or data theft.
Have SOX compliance checklist
It will help if companies prepare a list regarding what are the necessities for complying with SOX. Companies can:
- Check whether your SOX compliance tools are updated and alert-free and if there is any alert find the reason quickly.
- Prepare a regular document following SOX compliance. It will help you to remain prepared for SOX audits.
- Offer required access to SOX auditors so that they can complete their task
- If you notice any violation of protection or problems related to compliance regulations, report them immediately.
It is not at all challenging to fulfill SOX requirements. SOX software solutions automate data protection management. Therefore, companies can quickly meet compliance requirements.