The Sarbanes Oxley Act (SOX) was passed in 2002, and it helps establish rules in order to protect the investors and other stakeholders from fraudulent activities and unethical practices by the corporations.
In this regard, the main goal of the legislation was primarily to increase transparency in the financial statements by different corporations that can require formalized systems of checks and balances in all the relevant companies.
The main rationale that is put forth when it comes to compliance audit is based on the premise that organizations are able to comply with the set rules and regulations, and the investor interest is protected, at large.
Therefore, it has set a number of policies and implications that are supposed to be implemented and executed by the companies in order to propagate a system th1at is transparent, and has a minimized risk element pertaining to fraud, and other relevant malpractices that might have catastrophic repercussions for investors at large.
What does a SOX Compliance Auditor do?
Given the fact that SOX Compliance is not just a legal obligation, but can also be defined as a good business practice, it can be seen that it is termed as an increasingly important phenomenon that should be considered seriously be the organizations.
Implementation of these policies are highly helpful for the company in reinforcing internal controls, and also helps the companies to protect themselves from, cybersecurity breaches that might inevitably result in considerable loss of business data.
Therefore, the role of the SOX compliance auditor can simply be defined as an auditor who tends to play an important role in ensuring that the overall SOX rules and regulations have been implemented across the course of action of the company in context.
In this regard, it is also rudimentary to consider the fact the role of the auditor is primarily to provide an analysis of the overall compliance within the company, as well as the overall implementation strategies that need to be undertaken for compliance, in case there are areas which need to be focused on by the company.
All the compliance parameters are supposed to be covered by the company, and include the following aspects.
Firstly, it should be duly noted that CFOs and CEOs should acknowledge responsibility for accuracy, documentation, as well as submission of financial reports, in addition to the underlying internal control structure put forth by the SEC.
The auditor should ideally ensure that this ground has been covered, and there is no confusion regarding the distribution of responsibility, and delegation of tasks that are likely to extrapolate better outcomes.
Secondly, the auditor should also consider the internal control report that is prepared by the organization.
It becomes necessary to ensure that the company is able to state how the management is responsible for establishing internal controls in their financial records, and how all faults must be reported in case of any breach.
Thirdly, it is also supposed to be noted that there are formal data security policies, which should be communicated and duly enforced. The data security policies should be in place to protect the secrecy, and overall integrity of the organization, so that the stakeholder interest, at large, is not exposed to a risk of being sabotaged.
Lastly, the SOX Compliance Auditor is also supposed to look into all the relevant documentation that goes with provision of SOX Compliance.
This documentation needs to be continuously updated and maintained, so that there is no confusion regarding the application of the SOX policies within the system of the company, and how it holds fundamental value in order to ensure that that all the relevant recommendations have been duly considered.
Therefore, it can be seen that the SOX Compliance Auditor is supposed to cover grounds that include numerous sections of the SOX Act.
There are three main areas which need to be included and inspected by the auditor. They include Corporate Responsibility of Financial Statements (Section 302), Disclosure in Periodic Reports (Section 401), and Management Assessment of Internal Controls (Section 404).
The underlying objective of the SOX Auditor is to gather reasonable assurance that all these areas have been duly covered in order to get a proper feedback regarding the extent with which these policies have been implemented, and what steps need to be done in the future relevant to a better compliance, if any.
SOX Compliance Audit is considered as a fundamental step in building reputation and integrity within the company that can enable investors to invest confidently in the company.