SOX Compliance
Program Management Office (PMO)
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What Is SOX Compliance?
SOX non-compliance may result in large fines or imprisonment
SOX Compliance, United States Federal Law, was introduced in the USA in 2002 as a reaction to major corporate and accounting scandals. SOX sets requirements primarily for all U.S. publicly-traded companies (including wholly-owned subsidiaries) boards, management, and public accounting firms. There are some requirements for privately held companies, such as destroying evidence to hamper a federal investigation. Additionally, private companies preparing for an initial public offering (IPO) should also comply with SOX Compliance. SOX non-compliance may result in hefty fines or imprisonment. Therefore, top management has to certify the accuracy of financial information.
Section 404 (Assessment of internal control)
Section 404 requires external auditors and management to report the status of their Internal Control on Financial Reporting (ICFR). Documenting and testing financial manual and automated controls requires significant effort and is the costliest legislation for companies to implement. The management has to produce an internal control report as per each Annual Exchange Act report.
Section 302 (Disclosure Controls)
Section 302 requires internal procedures for accurate financial disclosure. The signing officers must certify within the quarterly 10-Q and annual 10-K reports filed with the SEC to establish and maintain internal controls. Under Section 404 (SOX 404 Compliance), SEC Registrants Are Required To Include With Their Annual Filing.
Under Section 404, SEC registrants are required to include with their annual filing
- The Framework is utilized by management to evaluate the effectiveness of internal controls
- Management responsibility statement for internal control over financial reporting
- A declaration that the company and the external auditor have issued a management and valuation attestation report (exemption for companies with float less than $250 million and emerging growth companies – 5 years)
Companies Require Experience And Resources To Comply With SOX Compliance Requirements
CPA CLINICS Can Assist With Both Co-Sourcing And Outsourcing Of The Following Activities
- Process documentation
- Performing fraud risk assessment
- Evaluating company-level (entity-level) controls
- Concluding on the adequacy of internal controls
- Evaluating internal controls over the financial reporting process
- Designing and operating a framework for effective assessment of selected internal controls and relevant assertions
- Evaluating controls designed to prevent or detect fraud, including management override of controls
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CPA CLINICS EXPERIENCE
CPA CLINICS is experienced in running the overall SOX program. This includes qualitative risk assessment and quantitative analysis to identify high-risk entities, business units, and frameworks for SOX and Internal Control Over Financial Reporting (ICFR) coverage, aligning the scope, test plan, and creation of sampling table with external auditor, managing Financial Assurance calendar (including audit committee and disclosure committee communications and certifications), and compiling reports to provide quarterly updates on SOX and ICFR program (including entity level and priority controls) to comply with SOX conclude requirements.
We are also experienced in process documentation (narratives, flow charts, etc.), testing of the controls identified and process improvement, Statement on Standards for Attestation Engagements no. 18 (SAE 18), 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, and reporting to Management and Board / Audit and Disclosure Committee as required.
We have provided substantial savings in SOX compliance costs to numerous companies with our risk-based approach based on a top-down assessment of significant accounts, business units, disclosures and relevant assertions, major classes of transactions, entity-level controls, and transaction risk analysis (misstatement and fraud).
Some Key Benefits
- Optimize testing
- Save money and time
- Streamline internal procedures
- Maximize external auditor reliance on work performed by CPA CLINICS
SOX Compliance FAQ'S
SOX involves an Internal Control Report that states that an organization is in charge for a suitable internal control structure for their financials. SOX requires formal data security policies and constant implementation of these data security policies.
SOX Controls are the rules that avert and detect errors in a business financial reporting process. SOX Controls are also identified as SOX 404 Controls. The SOX Controls make sure the company detects all the problems in organizational processes and meets its goals.
The role of SOX Compliance in any organization is to timely notice errors in a business process / financial reporting and protect the company’s data from threats and cyberattacks by implementing SOX Compliance financial security protocols.
The stated goal of SOX Compliance is to ensure the accuracy and reliability of corporate disclosures. The bill was passed to establish responsibilities of public traded companies’ boards of directors and officers and set criminal penalties on failing to comply.
SOX Compliance is the process that helps the senior management to evaluate internal control over financial reporting. The Sarbanes-Oxley Act of 2002 (SOX) requires the control testing.
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