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Efficiency Boost: How to Optimize Your SOX Program

May 30, 2024

As organizations evolve so, too, should their Sarbanes-Oxley (“SOX”) compliance programs. Day-to-day responsibilities, special projects, and other initiatives can monopolize business leaders’ time and hamper efficiencies. This can create a reactive environment where controls are developed as business decisions are made—prioritizing immediate external auditor concerns or emerging risks. This on-the-fly approach can cause an internal control program to spiral out of control.   

Reactive Controls Create Inefficiency 

Organizations often react quickly and develop a control to address a specific risk or concern. This approach sometimes creates a swift solution and moves the company toward a 1:1 control-to-risk ratio. Controls are designed and implemented due to misalignment among departments, external auditors requiring disaggregation of one control into many, or management implementing a control to mitigate a single risk for a single transaction or transaction type. The inefficiencies and duplication of efforts translate into time spent checking a box rather than taking a step back to optimize the internal control environment. That extra step can help ensure the maturity of the program aligns with the maturity of the organization.   

There are several symptoms of an inefficient process or control environment: 

  • Difficulty locating and organizing documentation/data
  • Missed deadlines
  • Dissatisfied stakeholders
  • Inconsistencies/variation
  • Difficulty planning and measuring success 

Optimizing your processes and control environment can transform inefficiencies into opportunities such as: 

  • Reduced costs
  • Improved efficiency and controlled compliance
  • Increased competitive advantage and confidence
  • Enhanced quality and consistency
  • Better performance monitoring and accountability 

Take the Time to Evaluate and Optimize 

When was the last time you optimized your SOX program? In an environment of never-ending deadlines—coupled with the cycle of monthly, quarterly, and annual reporting—stepping back to reassess your SOX environment and evaluate whether you have symptoms of inefficiency is not always top of mind. Planning to address it post-close, after the quarter, or next year are common reasons for not taking the time for an evaluation, but later won’t necessarily be any easier than now.  

Optimizing an organizations’ internal controls over the financial reporting framework can provide a fresh look at their environment and the program’s maturity. This will give leaders the ability to better understand the time, energy and effort that goes into these compliance factors. The efficiencies created through this exercise can free up resources to be put back into growing the organization.   

Three Steps to Optimize Your Control Environment

 Update Your Risk Assessment 

Update the scope and risk assessment to reflect the current environment and adjust controls accordingly. Evaluate key control assertions to ensure they are each mapped, giving proper (not excessive or duplicative) coverage. Take a top-down approach and de-key controls that have duplicative risks in favor of focusing on controls that give you the best ROI.  

Leverage Technology 

Technology can provide preventative, automated controls that reduce the need for labor-intensive ones, especially in the financial reporting process. A key part of optimization is leveraging a technology to manage, measure, and monitor your SOX program.   

Standardize Process and Procedures 

SOX programs are, and should be, constantly changing and improving. They should have an element of flexibility, ensuring they fit the business and its risks. It is critical to ensure policy, procedure, and process maps are updated regularly to reflect the current process. 

Addressing needs at a global level, establishing goals, and communicating effectively and efficiently will set the tone of your optimization efforts. You may find that you need support through this process. Engaging with experienced industry professionals who understand the process and associated risks is a great option to help you achieve your goals in a timely manner. This allows business leaders to do just that—lead the business. 

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Gerald Maloney

Gerald Maloney is a Senior Manager within the firm's Risk and Compliance Services (RCS) practice and has over 10 years of experience in internal audit, technology, SOX compliance, and risk management.

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