What is SOX?
SOX is a shortened term for the Sarbanes-Oxley Act. This was passed in 2002 and is designed to handle internal controls and reporting to protect current and potential future stakeholders from accounting errors, inaccuracies in corporate disclosures, and fraudulent practices. The goal of SOX compliance is to increase transparency in financial reporting by corporations and create a system of checks and balances in each company.
Who Must Attain SOX Compliance?
Sarbanes-Oxley applies to all publicly traded companies in the United States as well as wholly-owned subsidiaries and foreign companies that are publicly traded and do business in the United States
What Requirements Must Be Met to Achieve SOX Compliance?
The most important requirements outlined by SOX are:
- CEO’s and CFO’s are directly responsible for the accuracy, documentation, and submission of all financial reports as well as the internal control structure to the SEC. Jail time and monetary penalties are potential repercussions for compliance failures – whether or not they were on purpose.
- Internal Control Reports are required. These reports should state management’s responsibility for an adequate internal control structure for the financial records. Shortcomings must be reported up the chain as quickly as possible for transparency.
- Formal data security policies, as well as the communication and consistent enforcement of data security policies are required.
- Documentation that proves compliance and tracking should be maintained and provided by companies.
How To Get Started With SOX
The first step for SOX compliance is planning and implementing internal controls to protect the integrity of financial data. This could include controlling, access, tracking threats, logging change history, and more. These controls should also be regularly assessed to prevent new vulnerabilities from being exploited. It’s also wise to update your reporting and internal auditing systems so that you can pull any report in preparation for a SOX audit.
If you have more questions or need help with SOX compliance, the professionals at Red Lion are here to help. Contact us below and we’d be glad to lend a helping hand.
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Do you still have questions regarding SOX? Our compliance professionals can help you to understand and comply with SOX, regardless of complexity.
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