Ensuring SOX Compliance in IT and Security
The Sarbanes-Oxley Act of 2002 (SOX) is required for publicly traded companies to ensure financial transparency, prevent fraud, and protect investors by enforcing strict internal controls and reporting requirements. Although SOX primarily focuses on financial and accounting practices, it also mandates IT and security controls to safeguard the integrity of an organization’s data and processes (Specified in Section 404).
If your company is publicly traded, compliance with Section 404 of the act may be required. Ensuring compliance with the Sarbanes-Oxley Act requires a well-structured IT and security program. This article outlines the critical components necessary for maintaining SOX compliance and safeguarding organizational data and processes.
Program Management
A strong IT and security program for SOX compliance begins with management and stakeholder support. Establish a "tone at the top" to make sure that security policies are not only in place but also actively updated and enforced by leadership.
Report the IT and security program's status quarterly to senior leadership and the board of directors.
Access Control and Authentication Management
Managing access to sensitive data is fundamental to security compliance. Implement Role-Based Access Control (RBAC) to ensure that employees have access to only the information necessary to complete their job functions. Develop access granting and revocation procedures in accordance with the access control policy.
Conduct User Access Reviews (UARs) at least quarterly for all applications and resources. This is also a good opportunity to purge dormant or inactive accounts of former employees, contractors, or third parties.
Data Protection and Management
To prevent data breaches and loss, organizations should implement robust digital security controls to prevent sensitive data loss. This can include encrypting sensitive data at rest and in transit with a FIPS-approved encryption algorithm, implementing a Data Loss Protection (DLP) tool, and installing an Anti-Virus or Endpoint Detection and Response (EDR) solution.
While digital protection of data is crucial, the physical security of sensitive data is just as important. We recommend you securely store data in protected data centers and restricted areas, and make sure that access to these areas is logged to determine who enters and exits.
Define and strictly follow data retention requirements according to any regulations your organization is required to comply with.
Third-Party Risk Management (TPRM)
Vendors and third parties often pose large security risks, making Third-Party Risk Management (TPRM) a critical component of SOX compliance.
Establish strong contract management practices and conduct regular vendor assessments to ensure third parties adhere to security policies and compliance standards. To follow industry best practice, review high-risk vendors reviewed annually, review moderate-risk vendors when significant changes occur, and review low-risk vendors during onboarding and then on an as-needed basis.
Backups
A comprehensive backup strategy is essential to ensure business continuity in case of data loss or cyber incidents. Regularly back up critical data and conduct restoration tests to validate the reliability of backup systems. To properly protect backups, they should be encrypted and/or placed in an isolated environment
Change Management
Formalize change management processes to maintain compliance and security. Organizations should have a structured change management program that includes proper documentation, tracking, and reporting of change requests. This is usually done through the formation of a Change Management Policy and a Change Advisory Board (CAB). An effective Change Management Program ensures that system modifications are reviewed, tested, and approved before implementation.
Monitoring
Continuous monitoring is crucial for detecting and responding to security incidents. Security Information and Event Management (SIEM) solutions provide real-time analysis of security alerts and enable proactive threat detection. Monitor the IT environment to identify anomalous activity and respond to incidents as quickly as possible.
Consequences of Non-Compliance
Failure to comply with SOX can result in severe penalties. Executives found guilty of non-compliance may face fines of up to $5 million and imprisonment for up to 20 years. Companies that fail to comply can face up to $25 million in fines and even risk being delisted from the public stock exchange. These stringent penalties underscore the importance of maintaining a robust IT and security compliance program.
By implementing these key security controls and best practices, organizations can enhance their security posture, ensure compliance with SOX, and protect sensitive financial data from unauthorized access and cyber threats.
Echelon takes pride in being able to assist our clients in becoming compliant with any type of framework or regulation. Contact Echelon Risk + Cyber today for help with your security or compliance needs.
RESOURCES
- Sarbanes-Oxley Act of 2002
- Cryptographic Module Validation Program
- What is role-based access control (RBAC)?
- What is endpoint detection and response (edr)?
- What is security information and event management (SIEM)?
- SOX Violations & Penalties: How to Prevent Them?