Sarbanes-Oxley Compliance Services

The Sarbanes-Oxley (SOX) Act of 2002 brought significant changes to the corporate governance and financial reporting requirements of public companies. Section 404 of the SOX Act requires public companies to certify the effectiveness of their internal control over financial reporting. The external auditors of public companies must then provide an opinion on the effectiveness of each company’s internal control.

To prepare for this certification, public companies must develop a compliance plan that includes the appropriate steps to ensure that significant risks have been identified and assessed and that key internal controls are in place to mitigate financial reporting risks.

The process of preparing for Section 404 requires public companies to have specialized knowledge of the requirements of the SOX Act, the COSO Framework, and the internal control auditing methodologies followed by financial statement audit firms.

LBMC’s Sarbanes-Oxley compliance services can help entities with compliance efforts, entity-level risk assessment, and cost-effective control testing. We have extensive experience in SOX compliance, Section 404 and the COSO framework, documented and tested controls, and external auditing standards, assisting numerous companies with their compliance programs since 2004. Trust us to help you mitigate financial reporting risks and improve your compliance efforts.

Why is SOX compliance essential for businesses?

SOX compliance is crucial, particularly for companies in industries with limited compliance requirements. While it may not be necessary for banks, companies such as IT firms focused on healthcare, civic organizations, and Mastercraft can benefit greatly from SOX compliance. This compliance ensures that these companies are financially accountable and meets regulatory requirements.

By partnering with an external auditor like us, companies can cover SOX compliance in a relatively short time. Our team typically spends about 12 weeks per year working on SOX compliance for our clients. This is much more efficient than hiring a full-time chief audit executive and staff to handle the work. Our resources can be allocated among multiple clients, reducing costs and providing significant cost savings compared to hiring full-time staff.

SOX compliance is a critical requirement for companies in many industries. By partnering with us, businesses can achieve compliance quickly, efficiently, and at a lower cost.

Documentation and Assessment of Compliance with the COSO Framework

We assist clients with documentation and assessment of compliance with the COSO Framework, completion of the COSO Framework templates, and assessment of control gaps. In addition, we provide entity-level control testing services for key governance controls identified when assessing compliance with the COSO Framework.

Risk Assessment Facilitation

When assisting clients with a risk assessment, we follow a top-down, risk-based approach to ensure that future compliance efforts focus only on critical processes and systems. The purpose of the risk assessment is to identify the significant financial processes and systems that will be documented and tested as part of the SOX compliance process.

We work alongside your internal audit department to understand the systems that generate your financial reporting and assess your risks related to reliability and accuracy of financial reporting. Then, we develop a list of internal controls that are or should be in place to safeguard the financial reporting process.

Documentation of Significant Processes and Systems

We can effectively document an organization’s significant processes and systems in an efficient manner. This phase of the SOX compliance process is often cumbersome due to the detailed interviews and documentation efforts that are necessary for all significant processes and systems.

By maintaining continuity on your SOX audit engagement year after year, our auditors develop a deep level of familiarity with your processes and systems, and you don’t have to waste time re-training our team members. This level of familiarity enables not only the most efficient SOX compliance but also strong working relationships.

Financial Reporting Risk and Internal Control Assessment

As we develop our understanding of our clients’ critical processes and document the related systems, we will assess the key risks inherent within each process to determine which key risks would most likely prevent the related processes from meeting their objectives. We will then understand and assess the key controls in place to mitigate those risks. We will then report any control gaps for remediation.

Internal Control Testing and Reporting of Testing Results

After the key internal controls are identified, we work with our clients to develop testing plans to assess the operating effectiveness of those controls. During this phase, we will communicate frequently with the related financial statement auditor to ensure we agree to the controls being testing, the frequency and timing of the testing, the documentation to the testing and the related testing sample sizes. Communication is critical during this phase to ensure all parties are on the same page.

During the testing, we provide frequent updates to client management to ensure all control deficiencies are known and corrected as soon as possible. In addition, after testing, we will provide formal reporting to management and the related audit committee, if requested.

Link to Paul Sarbanes-Oxley (SOX) Compliance Services

Paul Demastus

Shareholder, Audit and Advisory

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