SOX Compliance Guide

Sarbanes-Oxley Act Compliance

The Sarbanes-Oxley Act of 2002 (SOX) established requirements for public company boards, management, and accounting firms to improve corporate governance and financial reporting.

Key Sections

Section 302 - Corporate Responsibility

• CEO and CFO certification
• Financial statement accuracy
• Internal controls designed and maintained
• Disclosure of control deficiencies
• Quarterly certifications

Section 404 - Internal Controls

• Management assessment of ICFR
• Annual report on control effectiveness
• External auditor attestation (404b)
• Material weakness disclosure

Section 906 - Criminal Penalties

• Knowing violations: up to 20 years
• Willful violations: up to 25 years
• Criminal certification requirements

Section 409 - Real-Time Disclosure

• Material changes to financial condition
• Rapid and current disclosure
• Form 8-K filings

Internal Control Framework

COSO Framework

Most companies use COSO for SOX compliance:

Control Environment

• Integrity and ethical values
• Board oversight
• Organisational structure
• Commitment to competence
• Accountability

Risk Assessment

• Objective setting
• Risk identification
• Fraud risk consideration
• Change assessment

Control Activities

• Policies and procedures
• Technology controls
• Segregation of duties

Information and Communication

• Relevant information
• Internal communication
• External communication

Monitoring

• Ongoing evaluation
• Separate evaluations
• Deficiency reporting

SOX Compliance Process

1. Scope and Plan

• Identify significant accounts
• Determine material locations
• Plan testing approach

2. Document Controls

• Process narratives
• Flowcharts
• Risk and control matrices

3. Assess Design

• Control objectives
• Design effectiveness
• Gap identification

4. Test Operating Effectiveness

• Sample selection
• Testing procedures
• Exception evaluation

5. Evaluate Deficiencies

• Control deficiency
• Significant deficiency
• Material weakness

6. Remediation

• Action plans
• Implementation
• Re-testing

IT General Controls

Key Areas

1. Access to programs and data
2. Program changes
3. Computer operations
4. Program development

Specific Controls

• User access management
• Change management
• Backup and recovery
• Job scheduling
• Security monitoring