Internal Controls / SOX Guidelines

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The 2002 Sarbanes Oxley Act (SOX) retains its technical relevance and regulatory significance as the need for reliable financial reporting grows in response to the ever-growing complexity of business transactions.

Section 404 of the SOX requires implementation of internal controls that ensure reliable financial reporting in public listed companies and some private companies while Section 302 holds the CEO and CFO responsible for the company’s financial reporting and all related controls, thus binding them to ensure their implementation and subsequent monitoring.

Any lapse in these controls leading to loss of reliability in the company’s financial reports can have serious implications for the CEO and the CFO. 

It is therefore immensely important that strictest compliance with SOX 404 is ensured through the deployment of dedicated resources and the same are hired externally if not enough are available in-house.

Expertise Accelerated can leverage its global talent pool to assign you SOX compliance experts to make you SOX compliant at all times.

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Internal Controls / SOX Guidelines


Control Environment

  • Integrity & Ethics
  • Oversight and Responsibility
  • Structure & Authority
  • Commitment to Competence
  • Enforce Responsibility

Risk Assessment

  • Specifies Suitable Objectives
  • Identifies and Analyses Risk
  • Assesses Fraud Risk
  • Analyze Significant Changes

Control Activities

  • Develops Control Activities
  • Develops Technology Controls
  • Develops Policies & Procedures

Information & Communication

  • Uses Relevant Information
  • Communicates Internally
  • Communicates Externally

Monitoring Process

  • Conducts Evaluations
  • Communicates Deficiencies

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What is the SOX requirement for internal controls?

Sarbanes-Oxley (SOX) requires an Internal Control Report that states management is responsible for an adequate internal control structure for their financial records. Any shortcomings must be reported up the chain as quickly as possible for transparency.

What are the key controls in SOX?

The SOX Sarbanes-Oxley (SOX) requires that the management produces an Internal Control Report, which iterates the management’s responsibility as regards the development and maintenance of an adequate and sufficient internal control structure for financial record purposes. Any shortcomings in this control structure need to be reported to the higher tiers of hierarcy at earliest.

What are the key internal controls?

The primary controls the management relies upon for risk mitigation or fraud prevention are referred to as the key internal controls, while secondary controls that serve as backup are referred to as the non-key controls.

What are the types of internal controls?

“Internal controls can broadly be classified as preventive, detective and corrective.

Preventive internal controls are pre-emptive in nature, averting a fraud or error before it occurs. In other words, these control are meant to hunt the bug before it hunts you.

Detective controls are designed to intercept instances or incidents of fraud or error as they occur for a timely remedial action to be taken for their redressal.

Corrective internal control are meant to rectify any fraud or error detected.

From a system design perspective, the preemptive, detective and corrective internal controls are the first, second and last line of defense, respectively.”