GRC 101: What is SOX Compliance?

What is SOX Compliance?

SOX compliance is a set of regulations designed to protect shareholders and the public from fraud. The law was enacted in 2002 in response to a series of corporate scandals in the early 2000s, and it applies to all publicly traded and some private companies in the United States. It also requires that these companies have an audit committee responsible for overseeing their accounting, IT practices, and financial statements. SOX compliance is a set of regulations that were put in place to ensure that companies run their business transparently and ethically. SOX compliance also requires that companies have (and can prove to have) an open and honest relationship with their investors, customers, suppliers, and employees. Many companies must be SOX compliant both financially and within their IT practices.

Companies need SOX compliance for the following reasons:

• To gain trust from investors over the accuracy of their financial records and the effectiveness of their internal controls
• To maintain accurate records of their financial transactions
• To verify internal control system(s) are in place

Why Does SOX Compliance Matter So Much?

SOX compliance can be a complex affair. Annual audits need to show accurate and secured financial reporting and IT integrity.

SOX has changed how organizations store and handle their electronic records. For instance, SOX internal security controls require data security practices and processes are entirely visible, so all interactions and financial records are stored and accessible over time.

Being non-SOX compliant carries severe consequences. Companies can be forced to pay huge fines that can complicate profit margins, and the news of such infractions can cause market and investor mistrust. The other aspect of being non-compliant renders legal matters such as not being allowed to participate in specific business verticals and sectors and potential imprisonment for company leaders.

These risks place enormous responsibility on the diverse teams and audit committees responsible for overseeing their accounting, IT practices, and financial statements. That covers a large swath of people and departments.

Companies often struggle with SOX coordination and implementation due to the many audit data points, roles, tasks, and reporting factors needed to gather, identify, rank, and remediate. To put this concept into perspective, that potentially means everyone involved in IT and financials will have a hand (if not both hands and arms) engaged in making sure a company is SOX compliant. The monetary, reputational, and legal risks are too significant to not fully comply.

The Benefits of Showing SOX Compliance

Attaining SOX compliance can be more than a cost of doing business; it can be an entry point to greater profitability.

Companies can achieve successful SOX compliance by improving their mindsets, systems, processes, and controls to enable business leaders to see SOX as an advantage, not something to cringe over or fear.

SOX compliance allows companies to embrace a culture of constant improvement and can be a source of revenue generation. Having systems and processes in place to enable up-to-date executive dashboards and automated communication and tasking can streamline areas beyond audit lanes.  

Continuously maintaining SOX compliance does come at a cost. But by changing mindset and choosing the correct people, tools, and processes, the gains and avoidance of losses can be significant.

With proper planning and influential leadership, companies can quickly leverage (and recoup) any SOX-based investment. Investments into platforms can improve workflows and help discover new business benefits. 

Intelligent SOX projects are opportunities to:

• Replace or improve manual processes with automated options
• Consolidate and enhance IT architectures
• Centralize IT initiatives
• Strengthen collaboration and communication between financial, IT, and senior leadership
• Create a culture of innovation
• Improve revenue and financial management

Risk Cloud Transforms GRC Processes like SOX Compliance

Risk Cloud® is a cloud-based platform with a suite of pre-built applications, including the SOX Control Testing Application, that combines expert-level content and service with accessible, no-code technology.

SOX Control Testing is purpose-built to act as a repository for internal SOX controls, related risks, and relevant business processes, and supports control owners, compliance departments, internal audit teams, and external auditors in assessing and maintaining SOX compliance.

Conduct Better SOX Controls Testing

Too many times, companies have way too many data points (and spreadsheets) involved in managing internal controls. SOX Control Testing consolidates all documentation and evidence into one central location to reduce the time it takes for companies to complete external audits.

There is no need to reinvent the SOX wheel. SOX Control Testing streamlines SOX tasks by offering:

• Built-in reporting that gives users control of granularity and summary level information
• Workflows for automated control testing and evidence gathering
• Deadline reminders
• Built-in workflows that assign, complete, and review all requests
• Elimination of duplicate work
• Better relationships between business processes, controls, and risks
• The ability to create a controls repository for all Internal Controls Over Financial Reporting (ICFR) and any additional controls 

How We Can Help with Your SOX Compliance

LogicGate's Risk Cloud has all your SOX needs and ROI potential covered.

Risk Cloud's SOX Control Testing Application gives you what you need — from documenting ICFR data to automating control testing and evidence gathering to centrally storing SOX-related data and processes more efficiently — all to help you achieve cost-effective SOX audit compliance. To learn more about Risk Cloud's SOX Control Testing, you can request a demo or visit us at logicgate.com.