29 Mar Defining SOX Controls – A Key to Understanding its Advantages
With shifting global market dynamics, implementing SOX compliance measures can greatly contribute to solidifying business continuity in times of change. The advantages may not seem to be immediately definable, but as solid SOX controls are put into place, benefits will be derived with each passing fiscal year. To better understand this it will be productive to understand what are SOX Controls.
SOX controls are the safeguards over the designated activities within a financial reporting process cycle.
A SOX control is a rule that prevents and detects errors within a process cycle of financial reporting. These controls fall under the Sarbanes-Oxley Act of 2002 (SOX). Although SOX is a US federal law that public companies doing business in the United States are required to comply with, Section 302 and Section 404 of SOX can apply to private companies. The law is intended to increase the accuracy and reliability of corporate disclosures in financial statements while protecting investors from corporate fraud. It also increases the responsibility of corporate governance. Companies must document, test, maintain and review controls over financial reporting as part of SOX compliance. These internal controls are processes to either prevent or detect problems while meeting objectives. To prevent noncompliance, auditors perform routine compliance audits.
SOX controls are the safeguards over the designated activities within a financial reporting process cycle. They are designed to assist each underlying business process achieve its objectives. Their purpose is to prevent and detect errors that would cause deficiencies in the process itself. When creating a system of internal controls for processes resulting in financial data, it is helpful to include control environment, risk assessment, control activities, information and communication, and monitoring. With 11 sections that dictate such areas as oversight, auditor independence, and corporate responsibility, SOX is a complex law. Yet, if an organization shows a willingness to challenge deep-rooted premises about the people, processes, and technology that a well-run SOX program requires, the complexity issue becomes non-existent.
FPV & Galíndez can guide you to redefine your scope, process, and delivery model to achieve SOX compliance at a lower cost and higher quality with the right approach and our track record of excellence is here to support that. Learn more about how we can set the right SOX controls for your business.
About the author: Amir Y. López Ortiz, CPA, MBA
López is our firm expert in the Sarbanes-Oxley Act (SOX) and is an accomplished CPA. He holds a BBA in Accounting from the University of Puerto Rico and a Master’s in Accounting from Turabo University. As a Semi-Senior Consultant with FPV & Galíndez, he uses his expertise and his vast experience in Banking and Internal Controls with our vast clientele such as Banco Popular