SOX and vs Operational Audit
SOX and operational audits are similar yet they have some differences between them. SOX is an external audit which is compulsory, and it is a requirement of the Securities and Exchange Commission. Operational audits are an internal audit of a very comprehensive nature.
SOX or Sarbanes-Oxley Act was especially introduced in 2002 by the government in order to improve and boost the confidence of the investors, safeguard their investments, and to control the impact of financial scandals increasing rapidly in big companies affecting the whole economy. SOX is also known as Public Company Accounting Reform and Investor Protection Act.
SOX prescribes some steps to be followed by the U.S. stock-listed companies. The companies need to certify that the company’s system of internal control is functional. Some standards are set by the law for public accounting companies to check the finances according to regulations set by U.S. law. They need to certify that there are no errors in the financial statements. It helps in regulating, inspecting, and overseeing the auditing of private companies. SOX is carried out by external auditors who are not employers of the company. If discrepancies are found, the senior officers have to face legal consequences in front of the U.S. law. The corporate boards are held accountable for any financial irregularities. Since its introduction, the confidence of the investors has improved, and the irregularity in the financial world has been regulated. Some people believe, though, that this law has hampered the U.S. financial edge over other countries.
An operational audit is an internal audit. It is an audit which is used for checking the procedures and financial systems of any given company. This type of audit is carried out by professional accountants and is a very good way of checking if the company is efficiently using all its resources. They are helpful in finding out any irregularities in the finances and misuse of resources. They help in improving the effectiveness and efficiency of the company’s internal operations. These audits are carried out according to the management of the company itself by its own financial analysts. These analysts or auditors are members of the company’s internal department.
It has only internal consequences in case of any irregularity found in the finances. The operational audit is helpful in improving a company’s project, increasing customer satisfaction, and in preventing thefts from the company.
1.SOX is an external audit; an operational audit is an internal audit.
2.SOX is for U.S. stock-listed companies and for safeguarding the interests of the investors; operational audits are for all companies.
3.SOX is for determining any irregularities in the financial affairs; an operational audit is for checking any kind of ineffectiveness and inefficiency in the finances of the company.