SOX Compliance – Understanding How Technology Can Support SOX Compliance

| Malcolm Adams Last updated 15 Dec, 2022

United States Congress, in 2002, passed the Sarbanes-Oxley Act, which aims to provide security to the general public against maliciously-acting corporations. The SOX compliance requirements are geared towards ensuring that organizations protect and secure their financial data and report accurately without any manipulation.

Adhering to SOX compliance is not only a legal requirement but also a best practice to promote a more secure and ethical business operation. In this post, let us try to understand how technology plays a role in supporting SOX compliance.

What is SOX Compliance?

The Sarbanes-Oxley Act was enacted in 2002 in the United States to improve corporate governance and accountability. It was done in response to some corporate scandals involving fraudulent activities in those years. Under this act, all the officers and board members of a public company in the US are liable for criminal prosecution.

SOX compliance is associated with annual audits taking place in public companies where they must produce evidence of secure, accurate financial reporting. IT departments in organizations are highly influenced by compliance as it changes the way corporate records are stored and handled. They must implement data security practices and techniques and ensure visibility over the interactions with financial data over time.

Prevent Data Leakage

Your network must have a practice in place to prevent data leaks. Every user must see that they don’t share information with outside people or bad actors. This requires using strong passwords at the minimum.

Another effective way is to configure a firewall. Prevention of data leakage also involves educating users about the best practices for IT infrastructure. They must know that clicking on an email link from an unknown source or plugging in an insecure USB can turn out to be harmful.

Customize the Solution

Every business operates differently with its own processes and systems. This makes it difficult to define exactly what you need for compliance.

As every organization uses different infrastructure configurations, tools, and techniques, the key requirements for SOX compliance should be aligned with the environment and operations during the audit.

Use Enterprise Software

One of the basic requirements of SOX compliance is to silo financial data to ensure protection against unauthorized access. Most organizations use ERP software to comply with this requirement.

With such a solution, they can control access and exercise version control of data. Versioning control is a must for an annual external audit.

How Technology Helps Support SOX Compliance?

Keeping large volumes of records for financial data and providing extensive documentation for SOX compliance can be overwhelming when done manually. Failure to produce accurate reports and maintain compliance with the standard can impose penalties on the business.

Technological solutions and practices can prove to be of great help during audits and reporting. Let us see a few ways technology supports SOX compliance.

Compliance Software

SOX compliance reporting is quite confusing and burdensome, which is why dedicated software that automates auditing responsibilities proves to be useful. Such software is capable of tracking data, identifying security threats, and generating compliance reports according to templates. It can also populate reports with data and analysis.

Event Management

SIEM, or Security Information and Event Management, technology is highly useful for its ability to support compliance, security incident management, and threat detection through the collection and analysis of data and events.

Many advanced tools automatically detect threats with the use of intelligence to identify hackers, malware, and unauthorized access, among others. These tools also send notifications for suspicious activities and potential sources of harm.

Secure Access

Modern access rights management tools can prove to be an important part of SOX compliance as they provide a comprehensive view of access across locations and servers, prepare data for compliance reporting, minimize data loss and guesswork, and simplify auditing operations.

Email Archiving

Using an email archive solution is another great option. Such a tool stores conversations in a safe, centralized location forever, where they can be accessed when needed. As you can easily retrieve your email records at any time, demonstrating SOX compliance becomes easy.

Automation

Robotic process automation, RPA, is a technology that can support SOX compliance to a great extent. With this technology, software robots mimic how users interact with applications to perform their routine processes in the business.

For example, consider filling out a form; a set of controls can facilitate designing a bot to run the process repeatedly throughout the organization to save effort and minimize human error.

Analytics

The introduction of advanced analytical tools has transformed huge volumes of data into sources of insights that can help enhance business interests.

Organizations, through standardization of processes, turn analytics from a series of solutions to a single truth across the lifecycle of SOX compliance.

Continuous Controls Monitoring

CCM utilizes technology to keep track of transactions in real-time without any reliance on sampling. Continuous Controls Monitoring can be a highly efficient way to improve business processes, identify risks, and check for compliance across multiple locations in an organization.

SOX Compliance: Secure Access Management

Enterprise Resource Management (ERP) software can help you with a lot of auditing processes, including SOX compliance. It will do a lot of work related to auditing, but here is how it helps secure access control management.

Implement security labels – Some businesses are required to use security labels to comply with security standards in the industry. Security labels also dictate the roles and rights of different members. The system also has built-in audit report functionality.
Silo financial data – The software allows you to silo data based on the requirements. For example, managers can access financial data but not modify it. Financial officers can have permission to create as well as modify data. Every data event is logged in the ERP for easy reporting.
Restrict permissions – In the absence of ERP, you might have to control data access through server permissions. Your files may need versioning control, and the control should be foolproof. ERP is an excellent way to ensure efficient versioning control. An EDM can also be used for this purpose instead of ERP.

How Technology Can Support SOX Compliance

SOX compliance requires the participation of IT departments because their efforts are necessary to assure financial data security and financial record availability.

An organization’s IT function must prove that its internal operations comply with the Sarbanes-Oxley Act’s data security requirements.

To fulfill their specific compliance obligations, an organization’s IT function must:

Be confident in their knowledge of all policies relating to privileged access
Understand existing log management standards for all financial records
Be receptive to greater transparency in financial data security practices
Strive for the continuous improvement of security risk remediation processes
Strive for the incorruptibility and ongoing dependability of all financial data

SOX sections 302 and 404 stipulate reporting limits for a company’s IT function to prevent internal and external agents from intentionally altering financial data.