Sarbanes-Oxley (SOX) compliance requires companies to establish internal controls and procedures for financial reporting. This increases accountability, accuracy, and transparency for public companies.
While SOX provides a framework, companies must implement the specific policies, documentation processes, and testing themselves. This is where a well-designed SOX compliance checklist comes in. It provides a roadmap to meet all SOX requirements.
Here are some of the key elements a SOX compliance checklist should contain:
Control Environment – This covers establishing an organizational culture of integrity and control consciousness. It involves setting a code of conduct, policies on conflicts of interest, accountability measures, performance appraisals, and segregation of duties.
Risk Assessment – The company must have procedures to identify, analyze, and manage internal and external risks that could impact financial reporting. This includes ongoing risk monitoring through the use of risk matrices, data analytics, and internal audits.
Control Activities – These policies, procedures, and mechanisms enforce management directives to mitigate risks. Examples include access controls, reviews, approvals, verifications, reconciliations, and segregation of duties.
Information & Communication – SOX requires open communication channels regarding roles, responsibilities, and significant transactions throughout the organization. Key compliance documents and financial reports must be accurate, accessible, and delivered in a timely manner.
Monitoring – Companies must continuously monitor the effectiveness of internal controls through self-assessments, internal audits, and management reviews. Identified deficiencies must be reported upstream.
A SOX compliance checklist allows you to track these elements while also customizing for your specific business processes risk profile. It provides a documented system of internal control that is the foundation for SEC compliance.
