SOX compliance requirements
SOX requires publicly traded companies to establish and maintain robust controls over financial reporting. This means prioritizing accuracy, implementing and testing controls, and undergoing regular audits.
Key SOX requirements include:
Accurate financial reporting
- Executive certification: CEOs and chief financial officers must personally certify the accuracy of financial statements (section 302).
- Disclosure: Companies must report material changes in financial condition.
- Independent audits: Financials must be reviewed by an external accounting firm.
Internal controls
- Establishment: Companies must design, document and maintain internal controls over financial reporting.
- Testing: Controls must be tested regularly for effectiveness (section 404).
- Frameworks: COSO, COBIT and other frameworks are commonly used.
- Scope: Controls span both business and IT systems.
- Change management: Controls must ensure data integrity during system updates.
Audit readiness
- Internal audits: Teams should regularly assess control effectiveness.
- External audits: Independent auditors validate internal controls and reporting processes.
- Audit trails: Companies must retain detailed records of financial transactions and controls for at least five years.
Additional compliance areas
- Access controls: Companies must prevent unauthorized access to financial data.
- Documentation: Organizations should retain financial records and communications for up to seven years.
- Whistleblower protections: Companies must establish secure channels for reporting fraud.
- Criminal penalties: Stakeholders must understand that noncompliance can result in legal consequences (section 902).
At its core, SOX is about enhancing transparency, accountability and trust in financial reporting—while protecting stakeholders from risk.
Why SOX compliance consulting matters
SOX compliance is complicated and constantly evolving. For many organizations, especially those without a dedicated SOX team, meeting these requirements can be a significant challenge. That’s where SOX compliance consulting adds value.
RSM has the people, processes and technology to help you get Sarbanes-Oxley compliance right. Our SOX compliance advisors have deep industry experience and employ a modernized framework and a sustainable, risk-based approach. In addition, we continually strive for the optimal balance of local and offshore support—to minimize costs while maintaining compliance.
RSM's methodology is founded on a risk-based, top-down philosophy. When efforts focus on the areas of most significant risk of material misstatement of the financials, the benefits of SOX compliance consulting can include:
- More efficient execution and assessment of internal controls
- Controls that are more effective in preventing and detecting material misstatements
- Reduced independent external auditor effort and related fees
We’ve developed testing methodologies designed to reduce the risk of financial misstatements, mitigate risk and decrease potential scrutiny from external auditors. By leveraging data analytics, process mining and automation, we can improve efficiency, accelerate compliance execution and ease the burden on your internal teams.
