HOW SOX IMPACTS FINANCIAL REPORTING IN INDIA?
INDIAN SOX = Clause 49
With the coming of SOX in U.S., India also took new corporate governance norms under Clause 49 of Listing Agreement which came into effect from 31 December 2005 and is mandatory for all listed companies. Some of the important provisions are as follows-
- As per the Clause 49, it is mandatory for a company with Executive Chairman, to have 50% independent directors on Board. If the company has no Executive Chairman, 1/3rd of the directors should be independent.
- CEO/CFO’s are required to assess internal controls and take corrective measures to check the deficiencies.
- CEO/CFOs are also required to certify the Financial Statements.
- All the companies are required to submit quarterly Compliance Reports at Stock Exchanges.
- A Compliance Certificate from auditors is to be obtained and annexed with Directors’ Report.
- Establishment of an Audit Committee.
- Clause 49 was revised to incorporate wider definition of independent directors and increasing the responsibility of audit committee.
- Whistle Blower Policy is to be set out to provide security to those who retaliate against wrong doers.
- Formal Code of Conduct is to be laid down for Board of Directors and Senior Management of the organization.
- Related Party Transactions are to be disclosed separately making the financial statements more transparent.
SOX is an essential law which has brought discipline in financial reporting process. The transparency brought by this act is boosting investor’s confidence that further helps building a strong capital market in the economy.
How can Vittoba Help:
Our service offerings cover the entire SOX Compliance lifecycle, including continuous monitoring and review:
PROJECT MANAGEMENT :
We can help your Project Management Office in executing a project charter, building the project team and performing an enterprise risk assessment, providing ongoing service to manage your SOX compliance including control executions, audit coordination, evidence collection and necessary compliance reporting.
DOCUMENTATION & REVIEW :
We can assist you in documenting controls, SOPs, flowcharts and narratives, defining test cases& test plans, creating risk and control matrix and planning any remediation / mitigation activity that may be needed. Alternatively, we can provide an independent review of existing documentation, assisting corporates to document and evaluate internal controls.
CONTROL TESTING :
We can assit you by providing assistance in developing Internal Control Framework, performing key controls testing, providing assistance in developing Risk Management Framework and also carry out an independent evaluation of both the design and the operational effectiveness of internal controls.
ONGOING SOX COMPLIANCE:
Our flexible resource pool can also help you to cope with the fluctuating resource demands of ongoing testing and certification – riding out the peaks and troughs of SOX activity with minimal impact on your business, SOX Compliance lifecycle, including continuous monitoring and review.
TRAINING PERSONNEL :
Training personnel on COSO, COBIT, Organization’s internal control framework, methods of documenting controls, SOX control awareness etc.
“Vittoba’s Sarbanes Oxley Advisory Services can help an organization with the implementation and maintenance of sustainable SOX 404 compliance programs through readiness assessments, through documentation and testing assistance and through sustainability assessments. In each of these services, Vittoba’s professionals work closely with clients to establish compliance programs, transfer knowledge and provide training to support a successful SOX 404 compliance program.”
“The requirements of SOX sections 302 and 404 are now a required component of annual assurance plans by organizations that are registered with the Securities and Exchange Commission (SEC).The penalties for violation of sections SOX Act include fines reaching into millions of dollars, and even imprisonment. In contrast to the ‘comply or explain’ approach of the Combined Code, Sarbanes-Oxley adopts a stricter ‘comply or else’ line.