Understanding the Significance of SOX Compliance.

Transcription

1 Understanding the Significance of SOX Compliance

2 Understanding the Significance of SOX Compliance The Sarbanes-Oxley Act (SOX) became effective in 2006 and was implemented to hold all US corporations accountable for their internal financial auditing controls to the Securities and Exchange Commission. This federal law was passed in response to a number of major corporate and accounting scandals. The Sarbanes-Oxley Act itself is organized into eleven sections, but sections 302, 404, 401, 409, 802 and 906 are the most important in terms of compliance. Failure to comply with regulations can result in fines up to $10 million and 30 years in prison for a corporation. Cognoscape takes pride in being more than just your regular IT department. We understand that your business is your top priority, and we want to formally address the Sarbanes-Oxley Act to ensure that compliance and regulatory procedures are in full effect. That s why we ve done extensive research to help you understand the significance of SOX compliance. Fundamentals of SOX Compliance Essentially, the main objective of SOX compliance is to establish safety and security measures that protect against misuse of confidential data and to track personnel who might tamper with data or commit fraud-related activities. A 2005 survey by the Financial Executives Research Foundation found that 83% of large company CFOs agreed that SOX had increased investor confidence, with 33% agreeing that it had reduced fraud. By implementing higher measures of security, the act is hoped to reduce fraud, build public confidence and trust, and protect data that may affect companies and shareholders. 2 Understanding the Significance of SOX Compliance cognoscape.com

3 The costs of regulation are more direct and easier to comprehend than the benefits, which are mostly indirect. According to HBS Associate Professor Suraj Srinivasan and Harvard Law School Professor John C. Coates, The costs of regulation are more direct and easier to comprehend than the benefits, which are mostly indirect. So there will always be upfront concerns about regulation, which leads back to the importance of building in opportunities to measure the costs and benefits. These are the two main sections of SOX compliance that directly correlate with safety regulations: Section 302: This is where the safety of faulty financial reporting can be immediately referenced. This particular section requires companies to safely document their data in hopes to ensure that financial reports are not built from false data, tampered data, or inaccurate data. Section 404: This section keeps organizations accountable to auditors. This is to ensure that independent auditors may disclose to shareholders and the public possible security breaches that affect company finances. Subsections of SOX Compliance Makes sure that the signing officer must agree to the logistics of reported information Mandates that the signing officer must verify that the facts are fairly presented in the report. This includes accurate reporting for the time periods B Requires internal controls over data, so that officers are aware of all relevant data. Data must exist in an internally controlled and verifiably secure framework. 3 Understanding the Significance of SOX Compliance cognoscape.com

4 All information that correlates with the security framework and parties responsible for the operation of the security framework must be disclosed to the auditors C Demands that appointed officers are testing the durability of internal controls within 90 days prior to the previous report. This security framework needs to be constantly reviewed and made verified. Section D Requires officers to continuously generate a report based on the efficiency of the security system and clearly state their findings. Section 404.A.1.1 States that a business is obligated to select auditors and hold them accountable to review control structures and procedures for financial reporting. All information that correlates with the security framework and parties responsible for the operation of the security framework must be disclosed to the auditors. Section 404.B Requires auditors to be aware of and report on any drastic modification to internal controls and/or significant failures that could immediately affect internal controls. Partnership With Cognoscape SOX Compliance deals heavily with internal data control. These laws and regulations are in accordance with government guidelines. Implementation can be extensive and overwhelming, but we have the tools and possess the knowledge to keep your company in heeding to these standards. Allow us the privilege to create and maintain a SOX compliance plan for your company. Call and learn more today! 4 Understanding the Significance of SOX Compliance cognoscape.com

5 Cognoscape LLC Dallas Parkway, #230 Addison, TX (214) cognoscape.com