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What Is the Sarbanes Oxley Act (SOX)?

The Sarbanes-Oxley Act (SOX) was passed by the Congress of the United States in 2002 and is designed to protect members of the public from being defrauded or falling victim to financial errors on the part of businesses or financial entities. SOX compliance is both a matter of staying in line with the law and making sure your organization engages in sound business principles that benefit both the company and its customers.

SOX compliance can often be achieved through a mix of data classification and cybersecurity measures that limit ransomware attacks, email phishing, and data breaches.

History of SOX Compliance

The Sarbanes-Oxley Act of 2002 was put forth by Senator Paul S. Sarbanes and Representative Michael G. Oxley. The bill came about in response to a series of high-profile incidents, such as those involving Enron, Tyco, and WorldCom—all of which involved the compromise of sensitive data. 

Sometimes referred to as the “SarbanesOxley Act” or “Sarbanes Oxley,” SOX levies criminal penalties on those who do not comply with its mandates.

Who Is Required To Comply with SOX?

What is SOX compliance? SOX compliance is required of all companies that are traded publicly in the United States, as well as subsidiaries that are wholly owned. It also covers foreign companies that carry on business in the U.S. and accounting companies that perform audits on other businesses.

The Requirements of SOX Compliance

CEO and CFO Acknowledge Responsibility for Accuracy and Documentation

The chief executive officer (CEO) and chief financial officer (CFO) have to affirm that all necessary documentation is submitted, filed with the Securities and Exchange Commission (SEC), and accurate.

Generating an Internal Control Report

The manner in which the company controls its financial reports has to be outlined, and any errors or issues need to be reported to executives.

Formal Data Security Policies

Data security policies need to be formalized and enforced. The ways in which the organization protects data need to be explicitly outlined.

Documentation Proving SOX Compliance

The documents that prove the organization is remaining in compliance need to be maintained and frequently updated.

SOX Compliance Audits

SOX compliance audits involve regular checkups to verify that the company is meeting the legislation's requirements. An organization may make use of SOX compliance software that can streamline the compliance-checking process, saving time while keeping the company in line with the necessary standards.

Preparing for a SOX Compliance Audit

To get ready for a SOX compliance audit, you should update all reporting and auditing systems, allowing you to pull reports that the auditor asks for. Also, you will want to make sure any SOX compliance software you are using is working well in case they are checked.

A few things to keep in mind when preparing for a SOX audit:

Access

Access refers to how you control the digital and physical access to data.

Data Backup

Have off-site backups of financial records that are compliant with SOX standards.

Change Management

Outline how you would manage changes without compromising security.

Sécurité

To verify security, outline your plans for defending the system against breaches.

SOX Compliance Checklist

Maintain Regular SOX Compliance Status Reports

Make sure you have all compliance reports updated and ready for presentation.

Verify Your SOX Compliance Software Is Up to Date and Clear

Your SOX compliance software must have the most recent iteration of the standards and be functioning well to protect your business from falling out of compliance.

Report Security Breaches

Reporting security breaches right away can help you remain in compliance with SOX standards, particularly because it prevents your company from looking like it is trying to conceal mistakes from the authorities or the public.

Provide SOX Auditors with the Access Needed

SOX auditors need unfettered access to your systems and records. Giving them clear access will show good faith on the part of your organization.

Benefits of SOX Compliance

Strengthening the Control Environment

When you bolster the security measures and data protection solutions of the control environment, both the company and its customers are safer.

Improving Documentation

Documentation can be used to keep track of your progress toward achieving data security goals. It can also be an effective tool for educating newer employees and for reviewing the success of specific programs.

Increasing Audit Committee Involvement

Ultimately, the audit committee wants to improve the security of your organization. Remaining in compliance helps everyone work together towards this goal.

Standardizing Processes

Standardizing processes makes them easier to replicate and teach to others. Also, when the time comes to adjust the implementation of procedures, standardized processes remove uncertainties associated with the logic, structure, and reasoning behind each measure.

Reducing Complexity

Protecting an ever-expanding attack surface is more difficult if an organized compliance system is not in place. By staying in compliance, you can develop consistent procedures for protecting various types of data.

Strengthening Weak Links

The process of ensuring compliance will often reveal areas of improvement that would have otherwise gone unnoticed. As these weak links are strengthened, the entire security profile is elevated.

Minimizing Human Error

In the course of an average day, imperfect humans have to make dozens, if not hundreds, of decisions. Therefore, errors are common. The compliance process provides you with an opportunity to double-check to make sure human errors are not harming your organization or its customers.

SOX Compliance with Fortinet

The Fortinet Public Cloud Security service helps organizations stay in line with SOX compliance standards by covering the whole attack surface. It can provide you with a Fortinet SOX report and integrates data aggregation and the sharing of information between the various security elements impacted by SOX. Notifications alerting the IT team to compliance issues, as well as tracking and reporting, make Fortinet Public Cloud Security an integral—and convenient—part of a SOX compliance initiative.

FAQs

What is SOX?

The Sarbanes-Oxley Act (SOX) was passed by the Congress of the United States in 2002 and is designed to protect members of the public from being defrauded or falling victim to financial errors on the part of businesses or financial entities.

Who is required to comply with SOX?

SOX compliance is required of all companies that are traded publicly in the United States, as well as subsidiaries that are wholly owned. It also applies to foreign companies that carry on business in the United States. In addition, SOX applies to accounting companies that perform audits on other businesses.

What are the requirements of SOX compliance?

The requirements of SOX compliance include the CEO and CFO acknowledging responsibility for accuracy and documentation, generating an internal control report, formal data security policies, and documentation proving SOX compliance.

What are the benefits of SOX compliance?

SOX compliance benefits include strengthening the control environment, improving documentation, increasing audit committee involvement, standardizing processes, reducing complexity, strengthening weak links, and minimizing human error.