 Glossary of Terms |
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Automation of your internal operations is the best way to negotiate the complexities of control processes and procedures. Doing so will save you significant time and money, and help you to systematically manage and analyze activities associated with control processes. The Sarbanes-Oxley (SOX) Act of 2002 has three main areas of compliance:
- Legal and regulatory requirements
- Accounting standards and guidance
- Internal Operations and Management
The Sarbanes-Oxley (SOX) Act of 2002 was developed to protect investors by improving the accuracy and reliability of corporate disclosure. In short, SOX makes reporting on internal controls mandatory for Securities and Exchange Commission (SEC) registrants and their independent auditors.
SOX was created to provide strict regulations and standards for corporate accounting information. For any public business enterprise, compliance to regulations and standards has become a necessity. The Act was enforced in response to the financial scandals of several large corporations that had mishandled their financial reporting. The lack of strict monitoring over this reporting resulted in millions of dollars in losses and significant investor distrust.
Section 404 of the Act directs the SEC to adopt rules requiring annual reports to include an assessment, as of the end of the fiscal year, of the effectiveness of internal controls and procedures for financial reporting. This section also requires a company's independent auditors to attest to and report on that management assessment. The act demands accountability - better expense reporting, accuracy and authenticity of the financial data, timeliness of compliance and real-time detection of financial risk factors.