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SOX-in-a-box: One size does not fit all when it comes to compliance

A Burton Group analyst explains why SOX-in-a-box is a fallacy and offers five steps for SOX compliance.

Let's face it; easy fixes are pretty tempting. Even though we know when we see Anna Nicole Smith touting a popular diet aid that popping a pill probably isn't going to make us magically slender, there's always that sliver of hope. In the world of information security there's never been a shortage of vendors touting the latest, greatest security fix that will perfectly solve all of our enterprise risk needs. Recently one of the big vendor hot buttons is automatic Sarbanes-Oxley compliance – "Take it out of the box, plug it in and you're compliant!"

The hype of SOX-in-a-box

Sarbanes-Oxley (SOX) compliance products aim to address the requirements outlined in Section 404, a, 2 of the regulation: "[an internal control report, which shall] contain an assessment, as of the end of the most recent fiscal year of the issuer, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting." I don't know about you, but that seems pretty vague to me. Do you trust any software vendor to be able to supply a single tool that guarantees the "effectiveness of your internal control structure and procedures" related to financial reporting? The ideal software would have to:

  • Define what's effective in relation to systems, applications and networks
  • Define what's effective for people and procedures
  • Apply that definition to all systems, application, networks, people and procedures involved in financial reporting

That's a lot for a single piece of software, or even a suite of software, to do. And, what does "effective" mean in IT? There are two commonly accepted frameworks used by enterprises and auditors in the Sarbanes-Oxley attestation process. The COSO (Committee of Sponsoring Organizations of the Treadway Commission) Internal Controls address business process, and CoBiT (Control Information for Information and Related Technology) addresses objectives related to managing information and data. But neither of these is prescriptive regarding what "effective" means. "Performs as expected" is one way to parse the "effectiveness" of the controls, but there is no specific prescription for every device and application involved in SOX compliance. For example, there is no explicit requirement for a specific algorithm to be used to encrypt sensitive financial or personal data in transmission. Do you really want a third-party software vendor, one that is not intimately involved in the day-to-day operations of your organization, to define "effective" for you?

Assume for a moment you are willing to adopt a vendor's definition of "effective." Does your organization have any proprietary applications or toolkits running, old client/server or mainframe apps, service-oriented architecture deployments or partner exchange portals that are involved in the financial reporting process? How about manual procedures? Many companies have written documentation related to how financials are reported that aren't directly reflected in applications or existent on the network. How would a "boxed" solution automatically integrate that information?

Many tools can make the reporting process more robust and efficient. But the SOX requirement, and even the CoBiT controls, are too open-ended and organizations too complex for a one-size-fits-all solution. There are five steps that you can take, however, to learn how SOX applies to your company and how to properly use the available tools to implement effective controls.

>> Read the five steps for SOX compliance.



About the author
Diana Kelley is a Senior Analyst with Burton Group. She has extensive experience creating secure network architectures and business solutions for large corporations and delivering strategic, competitive knowledge to security software vendors.

This was last published in April 2005

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