Why is data reconciliation necessary for SOX compliance?
January 16, 2023
Managing a large volume and variety of financial data is routine for many organizations. Important
information about cash inflows and outflows circulates through different departments, and each department
has its controls. The problem begins with the preparation of the financial statements. In most companies,
this information is not centralized but spread across various digital files and physical documents. Many
records are created in manual spreadsheets, increasing the risk of errors and discrepancies and making it
difficult to analyze and reconcile data for financial statement compilation. The result? The lack of secure
and reliable data on the company's financial performance and low scores on audit reports.
Many organizations need help managing a large volume and variety of financial data, which can lead to
problems in preparing financial statements. This information is often spread across various digital files
and physical documents and may be recorded manually in spreadsheets, increasing the risk of errors and
discrepancies. As a result, there may be a need for more secure and reliable data on the company's financial
performance and low scores on audit reports to protect investors from fraud.
The Sarbanes-Oxley Act (SOX) was established in 2002 to improve the accuracy and reliability of company
information in the financial statements of publicly traded companies doing business in the United States and
to safeguard investors from fraud. SOX includes a range of controls and procedures intended to prevent or
detect financial reporting issues and to ensure proper corporate governance and compliance practices.
To ensure compliance with SOX, companies must take steps to document, test, maintain, and review processes
related to their financial reporting and results. That involves ensuring that the company's reports meet the
disclosure requirements set by the Securities and Exchange Commission (SEC) and there are sufficient
internal controls in place to oversee the disclosure process. If these requirements are not met, the company
could face severe penalties, and executives may face criminal liability.
Having accurate data to meet SOX compliance requirements is insufficient. It is also
necessary to demonstrate that all processes and procedures used to produce the financial results have been
properly followed and documented. Automating the reconciliation process can help with this by centralizing
all relevant information in one place and allowing for the tracking of all data from the initial to the
final verification step. This can help ensure that all necessary procedures have been followed and
documented correctly.
In addition to being easily integrated with various ERP systems, automating the reconciliation process
offers a range of features that make it easier to track information, data, documents, records, and
discrepancies for each account included in the reconciliation. That helps to ensure transparency in the
process and provides evidence that accounts have consistently and thoroughly undergone verification.
Simetrik is a highly flexible no-code/low-code platform that allows end-to-end financial
reconciliation processes to be tailored and automated in a Big Data structure that can handle a large volume of
data and helps mitigate operational, compliance, and reputational risks.
To help ensure SOX compliance during financial reconciliation, Simetrik provides:
The certification and attestation of financial statement accounts involve multiple levels of approval. It is necessary to meet SOX compliance standards to clearly show how financial data was captured, processed, summarized, and reported. Simetrik helps increase visibility into the accounts' certification progress and indicates who was responsible for each stage of financial reporting.
To meet SOX compliance requirements, your organization has to demonstrate that financial data is safe from tampering, forgery, and destruction of records. Simetrik offers access controls, disaster recovery, and data protection to help ensure financial data security. In addition to following best practices for protecting customer data, Simetrik has strict security standards in place to maintain the confidentiality, integrity, and availability of information.
SOX controls require the segregation of duties in preparing, reviewing, approving, and audit of financial statement accounts to prevent errors and inaccuracies in financial reporting. This means that employees who have access to one level of information should not also have access to other levels of information. Simetrik offers separate workstations and access controls for each user, and permissions to view or edit reconciliation data can be customized or restricted for a particular account, group of accounts, or specific transactions to support this requirement. The access map can even be presented during audits.
SOX requires a minimum accuracy of 95% in reconciliation processes, making automation crucial. Simetrik is highly flexible and can be customized to fit any use case, allowing the configuration of workflows, account certification schedules, and data import. Balance updates can be performed in real-time, without the need for human intervention, which helps reduce delays and errors that can result from manual processes.
Simetrik allows users to view and review account balances in detail, including transaction history. Additionally, a proof of account balance is attached to the certified account, providing evidence that the account has been thoroughly reviewed and its balance properly verified before certification.
Simetrik records every action or process performed in the system, including changes made by users, file uploads, and changes in record status, along with the date and time of each action. The platform has ample storage capacity to retain historical information that may be needed for audit purposes.
Learn all the benefits your organization can obtain by automating its financial reconciliations with Simetrik's SaaS.
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