How To Get Started with your IT Compliance Efforts for SOX

There’s no question about it. For many of you top executives in the corporate world, all roads leading to a brighter future have to go through SOX compliance. And because the business processes that contribute to financial reporting (the crux of the Sarbanes-Oxley Act) are now highly reliant on IT systems, it is important to focus a good part of your attention there.

It is a long and arduous path to IT compliance, so if you don’t want your company to fall by the wayside due to inefficient utilisation of resources, it is important to set out with a plan on hand. What we have here are some vital information that will guide you in putting together a sound plan for SOX compliance of your company?s IT systems.

Why focus on IT systems for SOX compliance?

We’ll get to that. But first, let’s take up the specific portions of the Sarbanes-Oxley Act that affect information technology. These portions can be found in Section 302 and Section 404 of the act.

In simplified form, Section 302 grants the SEC (Securities and Exchange Commission) authority to come up with rules requiring you, CEOs and CFOs, to certify in each annual or quarterly financial report the following:

  • that you have reviewed the report;
  • that based on your knowledge, the report does not contain anything or leave out anything that would render it misleading;
  • that based on your knowledge, all financial information in the report fairly represent the financial conditions of the company;
  • that you are responsible for establishing internal controls over financial reporting; and
  • that you have assessed the effectiveness of the internal controls.

Similarly, Section 404, stated in simplified form, allows the SEC to come up with rules requiring you, CEOs and CFOs, to add an internal control report to each annual financial report stating that you are responsible for establishing internal controls over financial reporting.

You are also required to assess the effectiveness of those controls and to have a public accounting firm to attest to your assessment based upon standards adopted by the Public Company Accounting Oversight Board (PCAOB).

While there is no mention of IT systems, IT systems now play a significant role in financial reporting. Practically all of the data you need for your financial reports are stored, retrieved and processed on IT systems, so you really have to include them in your SOX compliance initiatives and establish controls on them.

Now that that’s settled, your next question could very well be: How do you know what controls to install and whether those controls are already sufficient to achieve compliance?

Finding a suitable guide for IT compliance

The two bodies responsible for setting rules and standards dealing with SOX, SEC and PCAOB, point to a well-established control framework for guidance – COSO. This framework was drafted by the Committee of Sponsoring Organisations of the Treadway Commission (COSO) and is the most widely accepted control framework in the business world.

However, while COSO is a tested and proven framework, it is more suitable for general controls. What we recommend is a widely-used control framework that aligns well with COSO but also caters to the more technical features and issues that come with IT systems.

Taking into consideration those qualifiers, we recommend COBIT. COBIT features a well thought out collection of IT-related control objectives grouped into four domains: Plan and Organise (PO), Acquire and Implement (AI), Deliver and Support (DS), and Monitor and Evaluate (ME). The document also includes maturity models, performance goals and metrics, and activity goals.

A few examples of COBIt’s detailed control objectives are:

DS4.2 – IT Continuity Plans
DS4.9 – Offsite Backup Storage
DS5.4 – User Account Management
DS5.8 – Cryptographic Key Management
DS5.10 – Network Security
DS5.11 – Exchange of Sensitive Data

By those titles alone, you can see that the framework is specifically designed for IT. But the document is quite extensive and, chances are, you won’t need all of the items detailed there. Furthermore, don’t expect COBIT to specify a control solution controls for every control objective. For example, throughout the control objective DS4 (Ensure Continuous Service), you won’t find any mention of virtualisation, which is common in any modern business continuity solution.

Basically, COBIT will tell you what you need to attain in order to achieve effective governance, management and control, but you’ll have to pick the solution best suited to reach that level of attainment.

Articles highly relevant to the one you just read:

Month End Accounting The Way It Should Be Today
Spreadsheet Woes ? Burden in SOX Compliance and Other Regulations
Spreadsheet Woes ? Limited Features For Easy Adoption of a Control Framework
How Internal Auditors Can Win The War Against Spreadsheet Fraud

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Malware

In the past, viruses were created with the sole purpose of wreaking havoc on the infected systems. A large fraction of today’s malware, on the other hand, are designed to generate revenues for the creator. Spyware, botnets, and keyloggers steal information from your system or control it so that someone else can profit. In other words, the motivation for making them is now more attractive than before.

Keyloggers can reveal your usernames, passwords, PIN numbers, and other authentication information to their creators by recording your key strokes. This information can then be used for breaking into various accounts: credit cards, payment programs (like PayPal), online banks, and others. You’re right, keyloggers are among the favourite tools of individuals involved in identity theft.

Much like the viruses of old, most present day malware drain the resources, such as memory and hard disk space, of contaminated systems; sometimes forcing them to crash. They can also degrade network performance and in extreme cases, may even cause a total collapse.

If that’s not daunting enough, imagine an outbreak in your entire organisation. The damage could easily cost your organisation thousands of euros to repair. That’s not even counting yet the value of missed opportunities.

Entry points for malware range from optical disks, flash drives, and of course, the Internet. That means, your doors could be wide open to these attacks at this very moment.

Now, we’re not here to promise total invulnerability, as only an unplugged computer locked up in a vault will ever be totally safe from malware. Instead, this is what we’ll do:

  • Perform an assessment of your computer usage practices and security policies. Software and hardware alone won’t do the trick.
  • Identify weak points as well as poor practices and propose changes wherever necessary. Weak points and poor practices range from the use of perennial passwords and keeping old, unused accounts to poorly configured firewalls.
  • Install malware scanners and firewalls and configure them for maximal protection with minimal effect on network and system performance.
  • Implement regular security patches.
  • Conduct a regular inspection on security policy compliance as well as a review of the policies to see if they are up to date with the latest threats.
  • Keep an audit trail for future use in forensic activities.
  • Establish a risk management system.
  • Apply data encryption where necessary.
  • Implement a backup system to make sure that, in a worst case scenario, archived data is safe.
  • Propose data replication so as to mitigate the after effects of data loss and to ensure your company can proceed with ‘business as usual’.

Once we’ve worked with you to make all these happen, you’ll be able to sleep better.

Other defences we’re capable of putting up include:

Disaster Recovery

Because information technology is now integrated in most businesses, a business continuity plan (BCP) cannot be complete without a corresponding disaster recovery plan (DRP). While a BCP encompasses everything needed – personnel, facilities, communications, processes and IT infrastructure – for a continuous delivery of products and services, a DRP is more focused on the IT aspects of the plan.

If you’re still not sure how big an impact loss of data can have, it’s time you pondered on the survival statistics of companies that incurred data losses after getting hit by a major disaster: 46% never recovered and 51% eventually folded after only two years.

Realising how damaging data loss can be to their entire business, most large enterprises allocate no less than 2% of their IT budget to disaster recovery planning. Those with more sensitive data apportion twice more than that.

A sound disaster recovery plan is hinged on the principles of business continuity. As such, our DRP (Disaster Recovery Plan) blueprints are aimed at getting your IT system up and running in no time. Here’s what we can do for you:

  • Since the number one turn-off against BCPs and DRPs are their price tags, we’ll make a thorough and realistic assessment of possible risks to determine what specific methods need to be applied to your organisation and make sure you don’t spend more than you should.
  • Provide an option for virtualisation to enjoy substantial savings on disaster recovery costs.
  • Provide various backup options and suggest schedules and practices most suitable for your daily transactions.
  • Offer data replication to help you achieve business continuity with the shortest allowable downtime.
  • Refer to your overall BCP to determine your organisation’s critical functions, services, and products as well as their respective priority rankings to know what corresponding IT processes need to be in place first.
  • Implement IT Security to your system to reduce the risks associated with malware and hackers.
  • Introduce best practices to make future disaster recovery efforts as seamless as possible.

We can also assist you with the following:

Quality Assurance

 

There is a truism that goes “The bitterness of poor quality is remembered long after the sweetness of low price has faded from memory”.

While every consumer can probably relate to this idea, business enterprises offering goods and services are the ones that should heed this the most.

Quality Management Systems

The concept of quality was first introduced in the 1800’s. Goods were then still mass-produced, created by the same set of people, with a few individuals assigned to do some “tweaking” on the product to bring it to acceptable levels. Their idea of quality at that time may not have been that well-defined, but it marked the beginnings of product quality and customer satisfaction as we know it now.

Since then, quality has developed into a very basic business principle that every organisation should strive to achieve. Yet while every business recognises the importance of offering product and service quality, it is not something that can be achieved overnight.

If you’ve been in any type of business long enough, you should know that there is no “quick-fix” to achieving quality. Instead, it is an evolving process that needs to be continually worked on. And this is where the importance of having a workable Quality Management System (QMS) in an organisation comes in.

Whatever Quality tools and processes you need to implement the change needed in your organisation, we can help you with it. We are ready to work in partnership with your team to develop strategic systems which will produce significant performance improvements geared towards the achievement of quality.

What is a Quality Management System?

A Quality Management System is defined as the set of inter-related objectives, processes, and operating procedures that organisations use as a guide to help them implement quality policies and attain quality objectives.

Needless to say, the ultimate goal of every quality management system is to establish quality as a core value of the company among all employees, and across all products and services. Why? Because quality services make for happy customers, and satisfied customers ensure continued business for the company.

A Quality Management System does not stop with simply having a set of guidelines that the leaders of a company can easily have their organisation members accept and adhere to. Rather, effective QMS can be implemented when management provides a culture of pride and patience, which will inspire acceptance of individual and group responsibility.

In this manner, not only the heads of the organisation but the employees as well, will develop the desire to achieve company goals that will benefit:

  • All contributing teams;
  • The customers; and
  • The company as a whole.

Find out more about our Quality Assurance services in the following pages:

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