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The intent of the Sarbanes Oxley Act of 2002 was simple — to guarantee that the information we rely on to make investment decisions is trustworthy and complete — but the actual implementation has proven to be anything but simple. Sarbanes-Oxley Act (SOX) includes eleven Titles, comprising sixty-six Sections, spanning from the establishment of new auditing oversight committees to new levels of auditor independence, specific attestation requirements for CEOs and CFOs, and criminal penalties for non-compliance. 

SOX Section 404 is one of the shortest and broadest-reaching statutes ever brought to bear on American business. It outlines management’s responsibility “for establishing and maintaining an adequate internal control structure and procedures for financial reporting” and for certifying the “effectiveness of the internal control structure and procedures.”

While the focus of SOX auditing and compliance is on top tier management, the real impact is being felt lower down in organizations. Since SOX does not provide “best practices” for the implementation of its requirements, departmental managers and individuals responsible for specific operations are left to define compliance and implement systems and procedures. Corporate personnel and outside consultants spent long hours determining how to satisfy Sarbanes Oxley Section 404. While virtually no department was spared self-examination and scrutiny, IT departments were most under the gun. One estimate states that in 2004 the average Fortune 500 organization spent 100,000 person hours on SOX compliance activities.

The current SOX auditing challenge is first to create controls that ensure compliance, and then to establish practices for monitoring and adapting theses controls to changing business realities. Organizations that most efficiently accomplish these tasks will minimize the risk to their senior executives and corporate image while gaining insight into business processes, potentially gaining sustainable competitive advantage as a result.

This practical guide to SarbOX takes the reader through the challenge of creating controls Sarbanes Oxley 404, ensuring compliance and establishing practices for monitoring and adapting these controls to changing business realities.

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