Staying compliant with the many rules and regulations that the Sarbanes-Oxley Act of 2002 (SOX) has put into place over the years is hard work. We've had the opportunities to speak with internal controllers and audit professionals about how they stay compliant with everything that SOX has put into place. Through these conversations, it's apparent that these executives are becoming increasingly concerned for their organization as the external pressure increases. Below we've listed the 6 ways to ensure that you remain compliant with SOX regulations.
1. EDUCATE YOUR EMPLOYEES
Although SOX is complex, educating your employees will prove to be fruitful for your organization. If your employees don't understand the basic principles of SOX compliance then it is putting you at a huge risk. After educating your staff, it's also important to remind them of their obligations on a regular basis. It has been proven that the more often you remind your employees of what the risks are, the less likely they are to commit fraudulent activities.
2. DOCUMENT YOUR ACTIVITIES
It's simple, if you don't have documentation of your control efforts then they are nonexistent. Document everything that happens and make sure that the information provided is understood by all of your employees. In the past, a signature may have sufficed for proof of reviewal but the PCAOB now wants hard evidence that a manager actually reviewed the material.
3. DETECT RED FLAGS
It's hard to detect a potential threat before it happens but there are steps you can take towards ensuring that these threats are minimized. In order to increase your ability to detect fraud or material misstatements, you need to first make certain that controls are appropriately designed. Second, it's recommended that you should periodically perform risk assessments for each process so that you can identify the weakest links in those processes. Lastly, if you notice something, the worse thing you could do is wait. Take action immediately and address any and all exceptions.
4. ESTABLISH AN INDEPENDENT AUDIT COMMITTEE (PUBLICALLY TRADED)
If you are a publicly traded company, SOX requires that your board establishes an independent committee for handling and overseeing all external auditors who are tasked with making sure your company's finances are in order. These individuals may not have any other relationship with the company and are not allowed to receive compensation for any other services performed for the company. Screen these individuals thoroughly during the appointing process.
5. ORGANIZE YOUR CONTROLS
In order to stay compliant with SOX, it's important that you stay on top of and organize your controls. It's generally recommended that you organize your controls into two main categories: general controls and application controls. General controls are pervasive across all or most platforms and applications. This will make it easier for you to visualize potential threats and locate specific controls.
6. UTILIZE TECHNOLOGY
If you've kept up with the trends within the industry, then you know that there are a ton of new technological advancements that make it easier to manage, visualize and control your SOX compliance environment. The best and most trending of these solutions are cloud-based and allow for you to work on them from anywhere and at any time.
Although Sarbanes-Oxley has been around from almost 20 years, it can cause a ton of pressure on both you and your employees. It's important that you stay on top of your compliance environment, especially if you want to avoid a government audit.