If you operate in an industry subject to the Sarbanes-Oxley (SOX) Act of 2002, you understand that failure to comply can lead to dire consequences.
SOX is a U.S. federal law governing certain aspects of business financial reporting and record-keeping. It imposes stringent penalties on businesses that fail to comply with the act. For instance, Section 302 of the act says that officers are subject to criminal penalties, including possible prison sentences, if they knowingly sign off on inaccurate financial statements, making data transparency a critical component for SOX compliance.
But besides your desire to avoid penalties, what specific benefits does compliance afford your business? Continue reading to see five benefits of SOX compliance for your company.
1. Risk Prioritization.
One way SOX compliance can benefit your company is by prioritizing risks. You’ll want to minimize all risks, but some are more essential to safeguard against than others. Using the right SOX compliance reporting software will allow your business to conduct risk assessments. You’ll be able to evaluate risks and determine if the risks pertain to confidentiality, availability, or integrity.
Knowing your business’ risk landscape is essential if you’re to launch a focused risk assessment. With a SOX compliant reporting tool, you can then focus most on safeguarding against the risks that present the most significant challenges.
2. Higher-Quality SOX Compliance Audits.
SOX compliance will also help your company conduct higher-quality internal audits. Your business will be more efficient and productive if it conducts internal audits. That’s why it makes sense to get the right audit software to help manage and scale higher-quality audits. Conducting better internal audits will have a trickle-down impact that leads to better external audits.
SOX compliance efforts will also lead to better future internal audits, more transparent financial reporting, and enhanced internal control structure. When you get the right Sarbanes Oxley Act (SOX) compliance software, control owners can update their own narrative and certify controls in one central financial reporting platform.
3. Better Control Awareness.
When consulting the SOX law, you’ll find that Sections 302 and 404 mandate documentation for controls. Required documentation includes personnel policies, operations manuals, and recorded control processes. It’ll take effort to meet the requirement for controls documentation, but complying with this SOX requirement also means your company will have a full audit trail and enhanced controls awareness. A SOX compliant reporting software like Workiva can link control narratives and flowcharts directly from your RCM, so your team always has access to the most up-to-date data for your next stakeholder report. When concentrating on internal controls through SOX assessments, your business will realize the importance of having the necessary controls in one, centralized cloud platform.
4. Better Financial Reporting.
SOX compliance is about helping businesses to achieve streamlined financial reporting. The primary purpose of SOX is to ensure financial reporting transparency, after all. While it’ll take time and effort to assemble documentation and bolster controls, doing so will translate into financial reporting that is more accurate and more efficient. In addition, this will ensure compliance with the financial reporting transparency annual SOX audits call for. With a financial reporting platform like Workiva, controllers can ensure their accounting team can collaborate, meet important deadlines, and improve SOX compliance and record-keeping inside one, centralized cloud reporting tool. With automated financial reporting you can rest easy knowing your financial reporting is accurate and you won’t waste time and money on fixing errors.
5. Better Company-Wide Collaboration.
Does your business encourage collaboration and communication across the enterprise, or do different departments operate independently with little interaction? SOX compliance requires collaboration amongst the various departments in your company. If the departments operate as proverbial islands, your SOX compliance efforts are doomed. Internal auditors, controllers and anyone overseeing SOX assessments must cooperate with anyone involved in information and financial controls.
As you can see, compliance is essential for SOX compliant audit reports. But it’s also in the best interests for your business, both now and in the future. It’s not just nice to have — it’s a must-have. You’ll find SOX compliance to be more manageable when you find the right software. It’ll simplify a process that can otherwise be complex and time-consuming, freeing your employees to focus on other core responsibilities.