As a result of SOX, IT departments are responsible for creating and maintaining an archive of corporate records. They seek ways in which to do this that are both cost effective and that are in complete compliance with the requirements of the legislation. Three rules in Section of SOX affect the management of electronic records. The best plan of action for SOX compliance is to have the correct security controls in place to ensure that financial data is accurate and protected against loss.
Developing best practices and relying on the appropriate tools helps businesses automate SOX compliance and reduce SOX management costs. Data classification tools are commonly used to aid in addressing compliance challenges by automatically spotting and classifying data as soon as it is created and applying persistent classification tags to the data.
Solutions that are context aware have the ability to classify and tag electronic health records, cardholder and other financial data, confidential design documents, social security numbers, PHI, PII, and other structured and unstructured data that is regulated.
This statement is to be submitted with a periodic report, also required by the Act. These penalties are for either;. Data classification enables security teams to more easily monitor and enforce corporate policies for data handling. Depending on the sensitivity of data and its applicable regulations, it may need to be encrypted, compressed, or saved to a different file format. Monitor your entire SOX environment in real time and stay on track with dashboards.
The Sarbanes-Oxley Act , passed by Congress and enforced by the Security Exchange Commission SEC , is designed to protect shareholders and the general public from accounting errors and fraudulent practices used by businesses and to improve the accuracy of corporate disclosures. It was enacted in response to a number of major corporate and accounting scandals.
All provisions of SOX apply to publicly traded companies headquartered in the United States, as well as wholly-owned subsidiaries and foreign companies that are publicly traded and do business in the United States. SOX also applies to any third parties that a publicly traded company outsource financial work to.
In general, private companies, charities, and nonprofits are not required to comply with all SOX provisions. However, certain provisions of SOX also affect privately held companies and nonprofits. For instance, intentionally destroying, altering, or falsifying documents with the intention of impeding or influencing a federal agency investigation or a federal bankruptcy proceeding carries fines and up to twenty years imprisonment.
In addition, whistleblower protection applies to these companies, which means that retaliating against someone who provides a law enforcement officer with information relating to a possible federal offense is punishable by up to 10 years imprisonment.
SOX also affects accounting firms; the rule builds a firewall between the auditing function and other services available from accounting firms. SOX also affects HR departments within publicly traded companies. It requires a firm to establish payroll system controls. SOX is arranged into 11 sections, also called titles. Two sections of particular importance are Section and Section Section pertains to "Corporate Responsibility for Financial Reports".
It establishes, in part, that CEOs and CFOs must review all financial reports and that the reports are "fairly presented" and don't contain misrepresentations. Internal controls include any computer, network hardware, and other electronic infrastructure that financial data passes through. It requires businesses to have an annual audit of these controls conducted by an external CPA firm.
This audit assesses the effectiveness of all internal controls and reports its findings back directly to the Security Exchange Commission SEC. Required disclosure of transactions and relationships that are off the balance sheet and could impact financial status;.
Establishment of fines and terms of imprisonment for tampering with or destroying documents in the event of investigations or court action; and. SOX also encourages disclosure of corporate fraud by protecting whistleblower employees of publicly traded companies or their subsidiaries who report illegal activities against retaliation, including dismissal and discrimination. SOX also makes it a crime for a person to knowingly retaliate against a whistleblower for disclosing truthful information to a law enforcement officer regarding an alleged federal crime.
This type of retaliation is punishable by up to 10 years imprisonment. There are several useful resources you can turn to when setting control objectives and preparing for a SOX compliance audit:. Keep in mind that SOX audits must be separate from other internal audits to avoid a conflict of interest. The goals for SOX IT controls are to ensure the systems are accurate, complete, and free from error since that would impact the financial reporting. The key to defining your scope for SOX is to understand which processes and systems actually impact financial reporting.
You may have a system that holds all of your customer information that is critical to the success of your organization, but if that system does not capture financial data that feeds into your financial reporting, then it is not a SOX application. It should still be well controlled, but it is not in scope for SOX testing.
Within the SOX controls, we designate the primary controls as key controls. So so much reliance is put on the key controls, these are monitored and tested more frequently. SOX control testing is a function performed by either management or internal audit or both, as well as by the external auditors. SOX control testing is performed to find out if the controls are working as intended or if there are any gaps in the internal control process.
SOX reporting is usually done both internally and externally. Internal SOX reporting includes SOX testing status updates created by management with any issues they have found and remediation plans. Due to the scope and complexity of maintaining audit programs to meet SOX requirements, the Institute of Internal Auditors recommends that management start testing SOX controls early each year and consider the program an ongoing, year-round internal control testing process.
The auditor then focuses on entity-level controls and works down to significant accounts and disclosures and their relevant assertions. It stipulates the rules of required annual reports, which must:. Because of this SOX requirement, system data must be both secure and available for reference when independent auditors conduct their assessments. This renders tracking and cataloging functions necessary because companies must report successful or attempted security breaches and their resolutions.
In other words, security information and event management SIEM is crucial. Auditors must have a paper trail to evaluate, so they must be able to access event log data to verify security systems are effective, documents are unaltered, and access is properly restricted. Understandably, providing extensive documentation of SOX compliance and keeping fastidious records of change management in privileged financial information for an entire company can be an overwhelming—if not impossible—task when done manually.
Further, the organizational stakes of noncompliance are incredibly high. According to Section of the Sarbanes-Oxley Act, companies bear the responsibility for inaccurate reporting, regardless of intentionality.
SOX compliance software is capable of tracking relevant data, flagging security threats, generating compliance reports in accordance with common templates, or populating easily individualized reports with cataloged data and computer-executed analyses.
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