Among the many compliance regulations U.S. companies must adhere to, one is crucial to ensuring your financial and accounting reports: SOX Compliance. Any financial business or department must follow a strict SOX compliance checklist to pass internal review or face heavy legal consequences. To help you meet these regulations for your next review, let’s examine what it means to be SOX compliant and determine the SOX compliance checklist you should meet.
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SOX Compliance Explained
SOX compliance is an annual government requirement under the Sarbanes-Oxley Act. Passed in 2002, SOX compliance is meant to protect the public from fraudulent, inaccurate, or purposefully malicious practices by making sure public-trading businesses comply to current financial reporting, data protection, and cybersecurity monitoring standards.
Through this legislation, U.S. officials hoped to create more trust between businesses and their clients through a formal system to ensure data accuracy and transparency on each organization’s internal accounting processes.
SOX Compliance: Required Businesses
When checking an SOX compliance checklist, it’s also important to determine whether such regulations apply to your business. Generally, SOX compliance is required for:
- U.S. public-trading companies: As a U.S. legislation, all public-trading companies in the country must meet SOX compliance.
- Private companies: Private companies that intend to present a public offer or promotional event in the U.S. must meet all regulations before launching their products.
- International or foreign companies: Global companies that own stocks or publicly trade in the U.S. must uphold SOX compliance to do business within the country.
- Accounting offices: Accounting firms must follow SOX standards to properly audit reports to the SEC for clients.
SOX Compliance Checklist: 5 Rules to Follow
During annual audits, CEOs and CFOs must check the accuracy of all financial and security reports prior to submission. Regularly reviewing an SOX compliance checklist can help ensure your business records keep up with current regulations. Here is a standard SOX compliance checklist to measure your organization’s financial and security controls:
Payroll System Reports
To account for all company payments, costs and financial assets, SOX compliance requires you to establish an automated payroll system to track and report on where finances go. This includes tracking employee benefits, training, individual salaries, and paid leave.
Demonstrate Backup Controls
Because SOX compliance is designed to protect client and shareholder assets, accounting firms must create secure data system backups of all their important records. The best way to create this backup is through a cloud storage system.
Restrict User Access
SOX compliance demands companies define their technical steps to add and grant network access to new employees. This requires defining the software used—such as the cloud system or multi-factor authentication program—as well as measures taken to restrict access. Such software should also track and record user activity to check for potential breaches. Creating a restrictive user access system will help organize data accessibility within your network and limit cybersecurity breaches.
Implement Cybersecurity and Data Security Protection
Financial companies must meet SOX compliance by enforcing cybersecurity and data security protocols within their workforce. This ranges from training personnel in safe online practices to installing software to track, monitor, and report potential threats when they appear. Systems that report on suspicious activity will help inform your IT experts on how to proactively block and prevent future attacks.
Maintain Transparency on Security or Technical IssuesTransparency during SOX compliance audits can confirm the honesty and integrity of your company, even if some gaps appear during your annual review. Auditors will take note of all reports and show results to shareholders, so it’s important to share any technical or security issues with auditors beforehand. Give auditors access to your security software, controls, and data systems so they can identify areas for improvement.
Stay SOX Compliant with Kraft
Using an SOX compliance checklist, you can keep your business and finances safeguarded from cyber threats. Through our Software Solutions, Kraft Business Systems offers a selection of services to help you stay SOX compliant year after year! Contact our team at Kraft today to learn more!