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News In-depth reporting on data breaches and news. Events Expand your network with UpGuard Summit. Newsletter Get the latest curated cybersecurity updates. The law is named after Paul Sarbanes and Michael Oxley, the two congressmen that drafted it. Meeting SOX compliance requirements is not only a legal obligation but good business practice.

The data security framework of SOX compliance can be summarized by four primary pillars: Ensure financial data security Prevent malicious tampering of financial data Track data breach attempts and remediation efforts Keep event logs readily available for auditors Demonstrate compliance in day cycles What is the History of the SOX Act?

SOX also applies to accounting firms that audit public companies. To fulfill their specific compliance obligations, IT departments must: Have confident awareness of all privilege access policies Understand current log management standards for all financial records.

Be open to increased transparency into financial data security practices. Strive towards the continuous improvement of security risk remediation processes. Aspire towards the incorruptibility and continuous reliability of all financial data. Section Corporate Responsibility for Financial Reports Every public company must file periodic financial statements and the internal control structure with the SEC.

Section Management Assessment of Internal Controls Section is the most complicated, most contested, and most expensive part of all the SOX compliance requirements.

Section Real-Time Issuer Disclosures The essence of Section is that companies are required to disclose, on an almost real-time basis, any material changes in the financial condition or operations.

Section Criminal Penalties for Altering Documents Section imposes penalties of up to 20 years imprisonment for altering, destroying, mutilating, concealing, falsifying financial records, documents, or tangible objects with the intent to obstruct, impeded, or influence legal investigations.

Section Sarbanes Oxley Whistleblower Section encourages the disclosure of corporate fraud by protecting employees of publicly traded companies or their subsidiaries who report illegal activities. Specifically, SOX sections , , and require the following parameters and conditions must be monitored, logged, and audited: Internal controls Network activity Database activity Login activity success and failures Account activity User activity Information Access How to Prepare for a SOX Compliance Audit Update your reporting and internal audit systems so you can pull any report the auditor requests quickly and verify that your SOX compliance software is working as intended so there are no unforeseen issues.

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The establishment of the Public Company Accounting Oversight Board PCAOB for the assessment of personal liability has reduced the gap between the purpose of audits and their fulfillment.

PCAOB was introduced to manage accounting decisions. It made audits an independent assurance to evaluate the operational effectiveness of the risk management measures taken by organizations and government control processes. Section and of SOX requires documentation of controls, including recorded control processes, operation manuals, and personnel policies.

The steps needed to meet compliance are not only productive for organizations but also lead to long-term financial success. Still, many organizations find the process overwhelming and expensive. With standard frameworks, organizations can strengthen their internal control structure and streamline the documentation of various control processes.

Strengthening internal business control leads to effective operations and reliable financial reporting. Businesses need to go through extensive tests of internal controls and certifications of accuracy to meet SOX compliance.

This encourages businesses to maintain the quality of financial reporting, automate and centralize it. Businesses need to invest in risk management tools that assure financial accuracy and meet compliance, leading to business continuity and growth.

To complete the audit, companies need to hire independent auditors. Auditors compare past statements with the current financial statement and determine whether the results are satisfactory. Auditors can also interview employees to ensure regular duties match their job profile. Performing a self-audit helps companies prepare for a SOX compliance audit. Organizations can also set up an in-house audit team who can help prepare for the SOX audit.

This article will discuss many of the common SOX control questions and explain how to lay a foundation for an effective SOX control testing program by discussing best practices for defining your scope, determining materiality and risks, and identifying SOX controls. Auditors frequently ask if there is guidance on all the possible SOX controls.

As SOX control examples, when dealing with financial systems there should be controls related to system access, segregation of duties, change management, approvals, and data backup. The challenge is in designing controls specifically for your systems, on your network, to meet your control objectives. On the business side, the controls are those around the accuracy of the data that feeds into financial reporting.

The goals for SOX IT controls are to ensure the systems are accurate, complete, and free from error since that would impact the financial reporting. The key to defining your scope for SOX is to understand which processes and systems actually impact financial reporting. You may have a system that holds all of your customer information that is critical to the success of your organization, but if that system does not capture financial data that feeds into your financial reporting, then it is not a SOX application.

It should still be well controlled, but it is not in scope for SOX testing. Within the SOX controls, we designate the primary controls as key controls. So so much reliance is put on the key controls, these are monitored and tested more frequently. SOX control testing is a function performed by either management or internal audit or both, as well as by the external auditors.

SOX control testing is performed to find out if the controls are working as intended or if there are any gaps in the internal control process. SOX reporting is usually done both internally and externally. Internal SOX reporting includes SOX testing status updates created by management with any issues they have found and remediation plans.

Due to the scope and complexity of maintaining audit programs to meet SOX requirements, the Institute of Internal Auditors recommends that management start testing SOX controls early each year and consider the program an ongoing, year-round internal control testing process.