| Under the section 404 of the Sarbanes-Oxley (SOX) | | | | records should be rewarded for the effort they put in. |
| Act, a public company has to file an internal report | | | | 2) Reviewing Controls: |
| about the financial reporting procedures it follows, the | | | | Test to see if the controls work, as they are intended |
| effectiveness of its design and operation, and the | | | | to. Your approach should be well planned. This will help |
| trustworthiness of its financial dealings. | | | | reduce the number of controls you need to test by |
| The Impact of Sarbanes Oxley on Public Companies: | | | | weeding out the ones that do not work. The |
| The internal report to be submitted under the SOX | | | | risk-based approach is applied to controls for financial |
| guidelines need to be detailed, and give a description of | | | | statements. You can also consider more than one |
| the financial dealings and state of the company. The | | | | type of control, or a blend of all, like manual/automated, |
| company needs to implement cost effective solutions, | | | | higher/lower etc. |
| reduce wasteful expenditure and use effective | | | | 3) Improving the Testing Procedure: |
| measures to cut down on costs. This is the only way | | | | Once the controls best for particular applications are |
| to make a favorable impression once the internal | | | | singled out, it will be necessary to test them for |
| report is out. | | | | compliance. Since testing can be expensive, most |
| Sarbanes Oxley Compliance Act Risk Based | | | | companies stagger the procedure over a period of |
| Approach | | | | two years. In the second year, more risk-based |
| According to financial gurus, the Sarbanes Oxley Act | | | | approaches are employed, and even external auditors |
| should be considered an opportunity for streamlining | | | | called in, if needed. Internal testing procedures must be |
| financial applications, and reducing costs for | | | | streamlined, and testing plans are standardized. |
| compliance. It is an opportunity for upgrading financial | | | | Compliance with the Sarbanes Oxley Act makes it |
| systems, and putting in modern infrastructure. Here are | | | | mandatory that organizations make testing procedures |
| some risk-based approaches: | | | | and the risk based approach part of their daily |
| 1) Good Management: | | | | business applications. The Act should be seen as an |
| If the senior management is convinced about the | | | | opportunity for streamlining controls, reduce complexity, |
| advantages of controls, the employees and junior level | | | | improve communication within the organization, and |
| managers also come round to the idea. While the | | | | reduce the risk of dishonest financial statements. |
| money and time spent on compliance may reduce | | | | There are a number of consultants available who can |
| after a period, the commitment of the management | | | | help you and your company to prepare for Sarbanes |
| should never diminish. In order to ensure compliance, | | | | Oxley Act. You can locate them all over the net by |
| incentives like promotions, raise, shares etc. are a good | | | | doing the correct search. |
| option. Those employees with good compliance | | | | |