SARBANES-OXLEY AND CLAUSE 49 RELATED SERVICE
The Sarbanes-Oxley Act of 2002 ('SOX') mandates that SEC registrants' management report on the effectiveness of their internal control system and procedures for financial reporting on an annual basis, as well as attest the financial statements. Senior management should always certify the existence, adequacy, and effectiveness of internal controls, and SOX also demands the external auditor of each organization to validate and report on management's evaluation.
Recent corporate scandals have eroded investor confidence in corporate reporting to some extent. The Sarbanes-Oxley Act of 2002 ('SOX') and Revised Clause 49 of the Stock Exchange Listing Contract were enacted by regulators in India, respectively, to minimize corporate malfeasance and protect investors. These laws established a new system of checks and balances in order to re-establish investor confidence.
Corporate stakeholders in today's businesses demand more assurance, oversight, and evidence of internal controls. The investing community's faith will only be restored once the gap between investor expectations and what they have obtained in the past in terms of corporate governance & what they have received in the past is bridged.
The Sarbanes-Oxley Act of 2002 ('SOX') and Clause 49 provide impetus to close the expectation gap by changing and enlarging the role and responsibility of key participants in the corporate reporting process, These laws aim to improve the accuracy and consistency of the corporate reporting framework.
SECTION 302 – ‘Corporate Responsibility for Financial Reports’ '
The signing officers must certify that they have personally investigated the statutory reports and that they are free of material misstatements and omissions under this Section 302 – ‘Corporate Responsibility for Financial Reports. This has been included to increase investor confidence in the reports by adding an element of accountability on the part of top management. Top management must also certify that they have reviewed the organization's internal controls and that this review was completed within 90 days of the reporting date.
SECTION 401 – ‘Disclosures in Periodic Reports’
With the Enron scandal, the focus shifted to off-balance-sheet items and how Special Purpose Entities (SPEs) were used to artificially inflate stock prices. As a result, this section comes into play, requiring financial statements to present a true and fair picture of the entity's financial situation. It necessitates the inclusion of all off-balance-sheet (OBS) transactions in financial reports.
SECTION 404 – ‘Assessment of Internal Controls
SECTION 404 – ‘Assessment of Internal Controls' is one of the most crucial sections because it discusses the detailed evaluation of internal controls in the financial reporting process. Management and the external auditor are obligated to report on the adequacy of internal controls and their operational effectiveness over financial reporting under section 404. Annually, an "Internal Control Report" is generated annually based on their detailed analysis and presented to the shareholders. They are also expected to provide input on IT issues relating to accounting. The costs of complying with this section are very high, but they are justified by the long-term benefits it provides by increasing investor confidence in the entity.
SECTION 802 – 'Criminal Penalties for Altering Documents’
In the event of a violation, SOX imposes severe penalties. Any kind of alteration of original documents can lead to imprisonment up to 10/20 years depending upon the facts of the cases. Fines can also be imposed as a form of additional punishment.
What is the role of SOX advisors/Consultants?
The Sarbanes–Oxley Act of 2002 is a US Federal Law that sets new or expanded norms for the boards, management, and public accounting firms of all US corporate entities. There are also a number of provisions of the Act, for example, the deliberate destruction of evidence to impede federal investigations, which also apply to private companies.
Role of SOX Consultant: The primary responsibility of the SOX consultant is to assist all aspects of the annual SOX program such as testing, restoration monitoring, risk assessment, walkthroughs, scoping, & year-end evaluations. The Sarbanes-Oxley (SOX) consultant will help set up and maintain the internal control framework for an organization's SOX, ensure that the risk of financial reporting is managed in line with applicable regulations and support the annual test and compliance efforts in relation to documentation.
- Operate with the IT Compliance with IT generic and automated control design, implementation and evaluation Analysis of risk importance and likelihood elements of financial reporting and business processes.
- Maintain internal control enhancement deployment, including changes to processes and system implementations.
- Suggest internal control enhancements to proprietors of processes and controls;
- Conduct internal inspections and running tests of internal controls.
- SOX Solution Offerings the below
- Top-Down Risk Assessments:
- Entity-Level Assessments:
- SOX Control Diagnostic Assessment:
- SOX Documentation Solutions:
- Our SOX audit process & SOX compliance requirements for the same, consists of 6 steps, let’s take a look at them:
Step 1: Defining the Scope of the SOX Audit Process with the Help of a Risk Assessment Approach
Step 2: Identifying SOX Controls
Step 3: Performing a Fraud Assessment
Step 4: Testing Key Controls
Step 5: Analysing Deficiencies in SOX
Step 6: Delivering the Management’s Report on Controls
HOW DOES SOX AFFECT INDIA'S FINANCIAL REPORTING?
INDIAN SOX = CLAUSE 49
With the implementation of SOX in the United States, India adopted new corporate governance standards under Clause 49 of the Listing Agreement, which became compulsory for all listed companies on December 31, 2005. The following are some of the key provisions:
- Clause 49 stipulates that a company with an Executive Chairman must have 50 percent, independent directors, on its Board. If the company does not have an Executive Chairman, at least one-third of the board of directors should be independent.
- CEOs and CFOs must assess internal controls and take corrective action to address any flaws.
- The Financial Statements must also be certified by the CEO/CFO.
- All companies must submit quarterly Compliance Reports to stock exchanges,
- A Compliance Certificate from auditors, which must be attached to the Directors' Report.
- The formation of an audit committee
- Clause 49 was updated to include a broader definition of independent directors as well as increased audit committee responsibility.
- The purpose of the Whistle Blower Policy should provide protection to those who take action against wrongdoers.
- A formal code of conduct for the organization's Board of Directors and Senior Management will be established.
- Related Party Transactions must be reported separately in order to make the financial statements more transparent.
SOX is a crucial law that has regulated the financial reporting process. This act's transparency is enhancing investor confidence, which is helping to build a strong capital market in the economy.
What India Experts Provides:
OUR INDIA EXPERTS’ SOX COMPLIANCE EXPERTS CAN HELP YOU:
- Plan, conduct and define the scope of risk assessment.
- Document major business, financial, application, and IT processes and related entities Checks general.
- Assess design effectiveness of Identify key internal controls document walkthroughs for reliance by auditors.
- Identify key internal controls for assertions of financial statements
- Assess internal control design effectiveness and documentary accomplishments for auditors' dependence.
- Testing internal control and documenting operative efficiency & effectiveness
- We are Evaluate aggregate as well as individual deficiencies & consult on remediation measures.
- Proper Report on results to control/ process management, owners along Audit Committee.
India Experts has developed solutions to assist businesses in achieving the level of compliance required by these laws. Our SOX Compliance services cover the entire lifecycle, including ongoing monitoring and evaluation:
PROJECT MANAGEMENT: We can assist your Project Management Office in developing a project charter, assembling a project team, and conducting a risk assessment for the entire organization.
DOCUMENTATION AND REVIEW: We can help you document controls, define test cases, and plan any remediation activities that are required. We can also provide an independent overview of available documentation, assisting companies in documenting and evaluating internal controls.
CONTROL TESTING: assisting in the development of an internal control framework, performing key control testing, and assisting in the development of a risk management framework. We can also conduct an independent assessment of both the performance and operational effectiveness of internal controls, assisting you in identifying control gaps and resolving them.
PERMANENT SOX COMPLIANCE: Our flexible resource pool can also help you deal with the varying resource demands of ongoing testing and certification, allowing you to ride out the peaks and valleys of SOX activity with limited effect on your business, as well as the SOX Compliance lifecycle, which includes continuous monitoring and review.
PERSONNEL TRAINING: Personnel training on COSO, control documentation methods, and so on.
Our Sarbanes-Oxley compliance services include:
Sarbanes-Oxley 404 (SOX) 404 compliance objectives and shareholder value as well as public credibility will be achieved by our professionals.
Outsourcing, co-sourcing/partnering, and loaned staff
Initial Sarbanes-Oxley compliance assistance
Want to hire a to-hire SOX consultant?
Would you like to recruit a SOX Consultant or your company? We are here to help you find the perfect candidate for the position whether it is a permanent or a short-term appointment.
Why should use us for your search?
We have learned with years of experience how to meet strict requirements of the regulatory environment and communicate within a risk-based approach with auditors and audit committees. The objectivity and quality of our team can demonstrate internal controls over opportunities for improvement in financial reporting and enable external auditors to rely on third-party work. And we can adapt to your specific needs and support level flexibly.
- Our large network of Indian experts allows us to offer the best talent on the market.
- Proactive head-hunting delivers the right candidate for your opportunity quickly, whilst improving the accuracy of the search.
- You will receive a shortlist of skilled applicants that meet your needs. This means that you don't have to select a few prospective candidate Bio-data’s.