SOX Compliance: Benefits and Penalties

The Sarbanes-Oxley Act of 2002 mandates companies to complete yearly audits and make those results easily available to any shareholders. Companies hire independent auditors, like FPV & Galíndez to complete the SOX audits, which must be separate from any other audits to prevent a conflict of interest. The primary purpose of the SOX compliance audit is the verification of the company’s financial statements. Auditors analyze past statements with the current year and determine if everything is up to code. Auditors can also interview personnel and verify that compliance controls are sufficient to maintain SOX compliance standards. SOX compliance results in good business practices for your organization, but failure to comply can bring unnecessary challenges. FPV&G breaks down both of these situations for you.

Benefits of SOX Compliance

A quick summary of the overall benefits of a company adhering to SOX requirements are:

  • A reinforced control environment
  • Enhanced documentation system
  • Expanded Audit Committee involvement
  • Convergence alternatives
  • Standardized procedures
  • Minimized complexity
  • Bolstering your weak links
  • Reduction of human error

These benefits are achievable since SOX compliance provides a basic level of financial assurance, stimulates investor confidence, and boosts market certainty for all publicly-held companies. It also allows corporate officials to redirect a percentage of the organizations’ profits toward developing better financial management processes and proficiencies that result in a reduction of the threat of lawsuits, give shareholders a greater sense of security, and aids the overall company operations by assisting executives to avoid poor decisions. This piece of legislation known as SOX has proved to support the standardization of crucial financial processes, remove unnecessary information systems, reduce inconsistencies in data loss prevention policy, computerize manual processes, and clear out nonessential controls.

Penalties

If there is found any type of altering of documents during the auditing process, this can result in penalties that include up to 20 years imprisonment. This includes altering, destroying, mutilating, concealing, falsifying financial records, documents, or tangible objects with the intent to obstruct, impeded, or influence legal investigations. Additionally, it imposes penalties of up to 10 years on any accountant, auditor, or other who knowingly and willfully violates the requirements of maintenance of all audit or review papers for a period of 5 years. Formal penalties for non-compliance with SOX can include fines, removal from delistings from public stock exchanges, and invalidation of D&O insurance policies. Under the Act, CEOs and CFOs who willfully submit an incorrect certification to a SOX compliance audit can face fines of $5 million and up to 20 years in jail.

 

With benefits fully outweighing the adjustments that companies need to make to comply, the SOX does not have to feel like a burden to your organization. FPV&G’s experts will introduce you fully to what the SOX act is and how to get the framework in place that your business needs to comply with and benefit from the adjustments.

 

 

About the author: Wilfredo Vera Pujols, CISA, CDPSE

A skilled consultant in the areas of Internal Audits and Compliance, Vera holds a BBA in Information Services from the University of Puerto Rico Mayaguez and a Master’s in Computer Sciences from the illustrious Polytechnic University of Puerto Rico. He has used his excellent preparation in the last 3 years of his specialty in Auditing and Consulting, Internal Controls, and SOX for our diverse clientele. Among some of his major clients are Evertec, Triple S of Puerto Rico, and Banco Popular, to name a few. We are sure that this ISACA member, along with the expertise of FPV & Galíndez’s skilled Consulting Department will provide strategic solutions for any IT and Cybersecurity needs your organization may have.