UK SOX

Sarbanes-Oxley UK (UK SOX)

Following the publishing of the Brydon review a number of significant improvements have been recommended in order to build greater trust in UK businesses.

 

The Brydon review gives further consideration to introducing a “SOX-Lite” regime in the UK. This will lead to a more robust requirement for an annual assessment of managements risk effectiveness and their internal controls and systems.

 

Further guidance on the review required is due to be formalised in the very near future, however firms should start preparing now by introducing a formal SOX review which allows management to attest to the effectiveness of their internal controls

 

The following are a few tips and pointers on how to prepare:

Don’t Leave It Too Late

› When Sarbanes Oxley (SOX) was rolled out for all US listed companies, this created a last minute panic in most organisations to become compliant and in  most cases they identified significant deficiencies far too late and were unable to remediate prior to the financial year end.

› This meant that the deficiencies had to be reported in the Financial statements with an assessment of the impact that they may have on the numbers reported, hence having an impact on the overall group share price.

Don’t Underestimate The Cultural Challenge

› One of the biggest challenges is ensuring that the Business is prepared for the responsibility and ownership that comes with being a process / control owner.

› As well as their day to day jobs, they will be required to ensure that evidence is complete and accurate and is readily available if required.

Ensuring any Audit requests are responded to in a timely manner

Identify Clear Milestones And A Plan

› Ensure that clear milestones have been identified and that these are captured in a plan.

› Delays in Design Assessment will have a major impact on your ability to remediate in time and/or to carry out operational effectiveness testing.

› Please see our SOX page for an idea of the steps that will need to be completed.

Ensure A Robust Governance Structure Is In Place

› Ensure that clear milestones have been identified and that these are captured in a plan.

› Delays in Design Assessment will have a major impact on your ability to remediate in time and/or to carry out operational effectiveness testing.

› Please see our SOX page for an idea of the steps that will need to be completed.

Establish Your Materiality

› This is critical as it will have an impact on the processes you bring into scope and the number of controls and processes that become key for your SOX review.

› Materiality will also help you determine how you prioritise, report, manage and evaluate any deficiencies identified.

› When reviewing controls and processes the discussion around whether it is material or not is one that will arise many times during the lifecycle on the project.

Don’t Go Overkill On The Number Of Key Controls

› A common mistake is to document and try and test as many controls in a process as possible.

› Each control will have a major impact on a business in terms of ensuring the controls are kept up to date, managed, assessed for changes as well as the time and cost incurred in testing/remediating controls.

From our experience, the direct cost per control can range from anything between £1.5k to £5k a year.

› The key here is to identify the right controls that prevent a material mis-statement to your financial statements.

› Our SOX Experts have lead a number of rationalisation sessions which have reduced the control environment on average by 40% and in one case as much as 85%

Don’t Underestimate The Benefits Of A SOX Review

› SOX is a powerful tool for businesses and helps ensure that their internal processes are robust and more importantly gives management assurance that no material mis-statements are posted to the Financial statements.

› Our experts have further added value by identifying inefficiencies in processes, revenue leakages and inaccuracies in models that were under or over stating profitability.

› In many cases we have lead to identifying millions of pounds of saving which have significantly off-set our costs in delivering the SOX project.

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