SOX Compliance

Sarbanes-Oxley Act Section 404 Compliance

What is the Sarbanes-Oxley Act Section 404?

SOX Section 404 (Sarbanes-Oxley Act Section 404) mandates that all publicly-traded companies must establish internal controls and procedures for financial reporting and must document, test and maintain those controls and procedures to ensure their effectiveness. They must also secure financial information and take adequate steps to ward off theft or corruption of data. The company employees must have proper access rights to deter fraud or misrepresentation of financial data. The purpose of SOX is to reduce the possibilities of corporate fraud by increasing the stringency of procedures and requirements for financial reporting. Key benefits of improved internal control over financial reporting include:

  • Improved effectiveness and efficiency of internal control processes
  • Better information for investors
  • Enhanced investor confidence

What are the implications of the Sarbanes-Oxley Act Section 404?

Section 404 of the Sarbanes-Oxley Act poses significant challenges for corporate boards and management, including:

  • The need to devote significant time and resources to ensure compliance
  • The need for management to evaluate and report annually on the effectiveness of internal control over financial reporting
  • The requirement for external auditors to opine on management’s assessment of the effectiveness of its internal control over financial reporting
  • The need to assess the implications of reporting this new information to the marketplace
  • The need for board of director and audit committee oversight of management’s process, findings, and remediation efforts as management scopes and executes its Section 404 plan


What is a document management system and how can it help with Sarbanes-Oxley Act Section 404 compliance?

A document management system stores, retrieves, manages and tracks electronic documents and electronic images of scanned paper-based information, tracks document lifecycle and audit trail and ensures timely approval of documents via automated document workflows. A document management software ultimately controls and organizes documents throughout an organization.

With the increased use of technology, many financial institutions are turning to paperless software as a solution for maintaining regulatory compliance standards with internal documents. If you choose a wrong document management solution, the non-compliance costs can be catastrophic.

Let’s find out in detail how LuitBiz DMS can help you achieve Sarbanes-Oxley Act Section 404 compliance through its document control process by asking you the following questions:

  1. Do you have controlled access to all your important financial documents?
  2. Do you receive real time alerts whenever an unauthorized person tries to access your documents?
  3. Are you confident that the integrity of your documents have been maintained?
  4. Do you know who has performed what operation on your documents and when?
  5. Do you have a version control system in place that ensures that you are working with the most recent version of the document?
  6. Are you easily at risk of a security breach?

If your answer to the above questions is a "NO", you definitely need a document management system to manage your business documents and ensure Sarbanes-Oxley Act Section 404 Compliance. If you do not manage your documents now, you will end up in the risk of paying huge fines for non-compliance.

LuitBiz DMS can help comply with Sarbanes-Oxley Act Section 404 that are pertain to document and records management. Let’s take a look at some of the key elements of the Sarbanes-Oxley Act Section 404 regulations and how LuitBiz DMS addresses them:

Rule What it means How LuitBiz DMS helps
Access Controls Access must be controlled to protected financial data via means like unique user-rolls and user-based permissions. All points of access to data, (database, file, folder, etc.), must be appropriately restricted to only provide access to those that are permitted. All documents and records are access controlled. Access in controlled at the folder level and users without access to a particular folder cannot even know about the existence of that folder in the system.
Auditing & Logging Audit controls monitor activity on software systems that contain protected information. The ability to monitor logon and logoff activity, file access, updates, edits, and any security incidents are the main features required for compliance. LuitBiz DMS maintains complete audit trail of documents of who has done what on the document and when and maintains a detailed log of all the activities performed on each document.
Integrity Ensuring the integrity of the financial data is the goal, so software should provide evidence that data has not been modified or altered. All documents and records can be easily monitored in LuitBiz DMS by persons with the right privileges to do so ensuring complete integrity of all the documents.
Confidentiality Confidential information cannot be exposed to unauthorized entities. Features like Encryption and Decryption, Automatic User Logoff, and Unique User Login and Passwords help ensure compliance is easily met. In LuitBiz DMS, documents are stored in encrypted folders. All users need the right combination of user name and password to access the system and the system automatically logs off users after a certain period of inactivity.
Availability Since authorized individuals must be provided access to financial data, considerations for compliance with this requirement go beyond the ability of software alone. Physical safeguards like data backups and facility security are considerations that must be applied to meet compliance. LuitBiz DMS is hosted in secured servers in EU where data is constantly backed up to ensure availability and meet compliance requirements.
Change Management The U.S. Securities and Exchange Commission, (or SEC), must be notified of any material changes to the process that governs the flow of financial data. Software that features System Event Logging can make this process exponentially easier by providing a reliable and tamper-resistant way to provide data to the SEC. LuitBiz DMS allows the admin to send notifications to the supervising authorities in SEC about events pertaining to the flow of financial documents.
Workflow Companies have to assess whether their processes for working with financial data are established, documented and structured properly to contain controls against risk. The workflow feature of LuitBiz DMS ensures that only those people can route documents that are authorized, so that financial data is secured against risks. Furthermore, document approval also password protected ensuring that the right person has approved the documents.
Shared Repository In companies with multiple locations and divisions, they have to ensure that their filing has a consistent approach. LuitBiz DMS offers shared repository so whether your offices are in New York or London, everyone follows similar format of file creation, etc.