Do you come down with waves of anxiety when your company’s accounting manager reminds you that it is time to prepare for the annual Sarbanes-Oxley (SOX) audit?
Your part in the audit is certainly important, but with some strategic preparation, it doesn’t have to drive you and your hard-working IT team toward the First-Aid kit to ingest up large doses of pain-reliever over the next few months.
Why Are SOX Audits So Important to Your Organization?
Sometimes it helps to remind ourselves why we take on some of the large-scale compliance tasks that we do in business. The Sarbanes-Oxley Act of 2002 was enacted in July of 2002 in the wake of the Enron, Arthur Andersen, WorldCom and Tyco International scandals. The U.S. Congress passed the act in an effort to protect investors by greatly minimizing the possibility of fraudulent accounting activities by corporations and auditing firms.
All publicly traded U.S. companies, all publicly traded non-U.S. companies doing business in the U.S., and private companies seeking their initial public offering (IPO) are subject to SOX compliance to protect investors, clients, staff, accounting firms and any other relevant parties.
Further, Why Is IT Cooperation So Important to Your Business’s SOX Audit?
While SOX is an accounting and financial mandate, the same is not true when it comes to technology. But wait, that doesn’t mean you are dismissed from SOX audit preparatory responsibilities. It just means that your role leans more toward the supporting category, but it is still quite important. Your financial and accounting team will appreciate your smaller but crucial role in the project.
Besides, SOX regulations are one of security’s biggest drivers in public companies, according to Network Computing, which makes you the perfect point person on this particular topic.
So, Now That You Understand the Importance of IT’s Role in SOX Compliance, What Next?
Now that you have made your peace with your role in SOC compliance, it’s time to learn more about the nature of IT’s role in the whole auditing and reporting process to lead your team to success. To pass a SOX audit, your organization must adopt and implement security best practices, which might include the following:
- Implementing a formal security information governance approach
- Preventing data loss
- Regularly backing up data
- Staying vigilant against social engineering tactics via fraudulent telephone and email scams
- Educating and training users, from the CEO to each staff member using technology resources
- Outlining clear use policies for employees and any third parties with access to your system
- Updating software and systems
- Creating an incident response strategy to distribute to relevant parties like your IT and executive teams
- Maintaining complex with all regulations, including SOX
Once you land on the right set of security best practices for any system in your organization that has anything to do with financial and accounting systems, you are on your way to solid SOX compliance.
On the Other Hand, Security Isn’t All There Is to It When It Comes to SOX Compliance
While security—and further, security best practices—is a key factor in SOX compliance, there are additional concerns to keep in mind that include risk assessment, user identification and authorization, security of online data and user controls, the monitoring of system utilities and applications, and malicious software detection and correction.
Security is certainly an underlying factor regarding these matters, as well as others not listed, but it isn’t the sole focus of the IT side of the SOX audit. Once you develop a solid strategy to deal with the major security concerns for your audit, you can start to explore the subtler points that lie slightly under the surface.
5 Tips and Strategies to Keep Your IT Department on Track to Complete SOX Compliance without Any of the Stress
With your trusted security best practices in hand and an idea of additional factors to keep in mind, it is time to try out a few tips and strategies that your industry peers have been using to keep an even keel during “SOX Season.”
1. Meet with the External Auditing Team
Once your organization has hired your external auditing team, schedule a meeting to introduce your respective teams and discuss your needs for a successful SOX auditing result. Discuss matters such as the designation of your primary contact person, a review of your preparatory materials at the project’s onset and additional information about what the auditors will need along the way.
2. Inventory Your Controls
Properly document your Internal Controls Over Financial Reporting (ICFR) to gear up for the arrival of your organization’s external auditors for the SOX audit. Your internal controls refer to procedures designed to ensure compliance with your organization’s policies. Keep in mind three types of controls: 1) Controls that affect your company’s operations 2) Controls that affect your company’s compliance with laws and regulations and 3) Controls that affect your company’s financial reporting.
3. Determine and Detail the Financial Tools and Technology That Your Organization Uses
Regardless of the type of system—whether a basic financial system like QuickBooks, NetSuite, Intaact or something more elaborate that has been tailored to your organization—it will help for you to describe it in anticipation of your external auditing team’s arrival. Also, it doesn’t matter what technology tools you use from the above or otherwise, as long as you use yours correctly, and it offers accurate results that you can confidently deliver to your external auditing team.
4. Document Relevant Policies, Procedures and Processes
Assess, document and communicate financial, legal and operating policies and procedures to provide to your auditing team. Throughout the year, be sure to keep your team updated on any major changes in policies, procedures and processes. This step helps to maintain a culture of accountability and to reinforce the importance of internal controls to avoid a potential material control weakness on your external audit.
5. Note Organizational Factors Like Segregation of Duties
Make sure that your roles and responsibilities are properly defined by implementing a Segregation of Duties (SOD), which serves as the “basic building block of sustainable risk management and internal controls,” according to the AICPA. For example, do not assign the same employee who maintains the general accounting ledger the authorization to approve purchase orders or cut checks to pay invoices.
Put Your SOX Compliance Plan into Action for Complete IT Readiness
At I.S. Partners, LLC., we understand the headaches that an upcoming SOX audit can cause the most efficient IT team. Your days are jam-packed with daily responsibilities, as well as plenty of unexpected front-burner issues that arise and require your attention, so we know what a wrench preparing for an audit can become. We can help you work out the rough edges to streamline your preparation to garner pitch perfect SOX compliance with minimal interruption.
If you need more information on planning for your IT department’s role in a SOX audit, or if you want to schedule a meeting to discuss our auditing services in more detail, call us at 215-631-3452, send us a message, start a chat session or request a quote.