The Sarbanes-Oxley Act (SOX) was introduced in the United States in 2002 as a response to major corporate and accounting scandals. This federal law sets stringent requirements for all U.S. publicly-traded companies, including their wholly-owned subsidiaries, boards, management, and public accounting firms. While primarily targeting public companies, SOX also imposes certain obligations on privately held companies, particularly those preparing for an initial public offering (IPO). Non-compliance with SOX can result in hefty fines or imprisonment, making it imperative for top management to certify the accuracy of financial information.

Understanding SOX Compliance

SOX compliance is essential for maintaining transparency and integrity in financial reporting. The law aims to protect investors by improving the accuracy and reliability of corporate disclosures. Key aspects of SOX compliance include:

  • Section 404 (Assessment of Internal Control): This section requires external auditors and management to report on the status of their Internal Control over Financial Reporting (ICFR). Documenting and testing both manual and automated financial controls is a significant effort and represents the costliest aspect of SOX compliance. Management must produce an internal control report as part of each Annual Exchange Act report.

CPA Clinics’ Expertise in SOX Compliance

At CPA Clinics, we have extensive experience in managing comprehensive SOX compliance programs. Our services include:

  • Qualitative Risk Assessment and Quantitative Analysis: We identify high-risk entities, business units, and frameworks for SOX and ICFR coverage.
  • Scope and Test Plan Alignment: We align the scope, test plan, and sampling table creation with external auditors.
  • Financial Assurance Calendar Management: We manage the Financial Assurance calendar, including audit committee and disclosure committee communications and certifications.
  • Quarterly Updates and Reporting: We compile reports to provide quarterly updates on the SOX and ICFR program, covering entity-level and priority controls.

Our Comprehensive Services

We offer a range of services to ensure thorough SOX compliance:

  • Process Documentation: We create detailed narratives, flow charts, and other documentation to support the compliance process.
  • Control Testing and Improvement: We test identified controls and recommend process improvements.
  • Attestation Engagements: We handle Statement on Standards for Attestation Engagements no. 18 (SAE 18) and Service Organization Controls (SOC) 1 Type 1 and Type 2 – ICFR, SOC 2 Type 1 and Type 2 – AT 101 (Trust Services Principles: Security, Availability, Processing Integrity, Confidentiality, or Privacy), and SOC 3.
  • Management and Board Reporting: We provide comprehensive reports to management and the Board/Audit and Disclosure Committee as required.

Benefits of Our SOX Compliance Services

Our risk-based approach, which includes a top-down assessment of significant accounts, business units, disclosures, and relevant assertions, has provided substantial savings in SOX compliance costs to numerous companies. We focus on:

  • Major Classes of Transactions: Analyzing significant transactions to ensure compliance.
  • Entity-Level Controls: Evaluating controls at the entity level to mitigate risks.
  • Transaction Risk Analysis: Assessing the risk of misstatement and fraud in transactions.

Conclusion

Ensuring compliance with SOX is critical for maintaining the integrity and reliability of financial reporting. At CPA Clinics, our experienced team provides comprehensive SOX compliance services that help businesses navigate the complexities of this federal law. Contact us today to learn more about how we can assist you in achieving and maintaining SOX compliance.

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