SOX managed services: Five considerations

Authored by RSM US LLP

Could your organization spur growth and gain efficiency by outsourcing Sarbanes-Oxley (SOX) compliance? For many public companies operating in the United States, the answer is yes.

Ensuring SOX compliance is a time- and resource-consuming process, and non-compliance has significant ramifications. While in-house teams once were able to manage compliance processes, conduct internal audits, and ensure adherence to regulatory requirements, many companies now require more consultative support from technical resources even as they struggle against the rising cost of their SOX programs.

Several factors are prompting discussions around outsourcing some or all SOX compliance efforts.

Some of the most common challenges

Greater external auditor scrutiny

As regulator expectations have increased, many companies are finding themselves in difficult discussions with their external auditors. What was good enough several years ago may no longer be adequate.

High operational costs

Maintaining an in-house compliance team entails significant expenditures on salaries, training, infrastructure, and software licenses.

Resource constraints

Growing enterprises often lack the resources and knowledge required to establish robust compliance frameworks internally.

Complexity and risk

SOX compliance demands meticulous attention to detail and ongoing monitoring, leaving room for errors and oversights that can lead to costly penalties and reputational damage.

Addressing these realities can be expensive, especially if your organization lacks a comprehensive governance, risk, and compliance (GRC) platform—a costly proposition in and of itself.

Outsourcing SOX compliance to a third party is a popular solution that can free up your team for tasks that support your business objectives, facilitate growth, and identify efficiencies. The right advisors can also add value to the SOX compliance process itself. For organizations looking for a hands-free, turnkey solution, a SOX managed services engagement might be ideal.

SOX services value

SOX managed services is a subscription solution that replaces some or all of an organization’s SOX compliance auditors with predictably priced access to knowledge and technology that forgoes costly capital investment in IT infrastructure and staffing.

Here’s a closer look at five considerations when evaluating SOX managed services

1. Specialized skill set

With the evolution of both the Public Company Accounting Oversight Board and the Securities and Exchange Commission in continuing to develop, propose and issue rules, SOX outsourcing can be a vital resource for navigating complex regulations, compliance requirements, and industry standards.

A third party can allow you to tap into the knowledge and skills of external advisors who are well-versed in the intricacies of SOX regulations and who closely monitor the continuously evolving regulatory and risk landscape—all without the burden of internal training and resource allocation. These professionals study the market and review processes and standards so they understand the emerging risk areas for companies even beyond the regulatory landscape; an internal function is likely to have a more limited outlook.

Additionally, you can leverage these advisors to enhance your risk management framework, mitigate the risk of material misstatements in financial statements, and improve decision-making processes. A SOX compliance advisor can also improve governance and transparency. Through rigorous compliance measures and regular assessments, advisors can demonstrate your commitment to ethical practices, accountability, and shareholder protection. This can foster trust and confidence among stakeholders, including investors, customers, and employees, while also enabling your internal resources to work on items that drive growth and value unique to your business.

2. Lower and more predictable employee costs

Maintaining an in-house compliance team can be expensive, particularly when you consider the costs associated with hiring, training, and retaining qualified professionals. SOX outsourcing allows you to access the necessary compliance services without the overhead associated with a full-time internal team. This more cost-effective approach is particularly useful for companies that don’t require full-time personnel solely focused on compliance, and it’s also beneficial for larger firms that find it difficult to retain internal SOX specialists.

3. Business flexibility

Companies that outsource SOX can scale their compliance efforts up or down as needed, depending on their specific requirements. This flexibility allows you to adapt quickly to regulatory changes or fluctuations in workload, ensuring a more agile and responsive approach. If your internal audit function is managing your SOX program today, you can pivot those internal audit resources to more operational audits that allow for process optimization or enhancements and efficiencies.

4. Access to value-add services

Top-tier SOX consulting firms often deliver additional services such as internal training and real-time reporting as part of their offering. Your advisor should be able to provide you with complete access to data-driven insights in real-time, at any level, from granular details to the bigger picture. If you use a seasoned business consulting firm like RSM, you also have full access to a deep bench of SOX professionals for regulatory and optimization guidance that extends beyond SOX compliance.

5. SOX transformation

Getting the most out of your SOX program means going beyond compliance and toward SOX transformation to create additional value. By assessing and strengthening internal controls, a skilled SOX compliance team can identify areas of inefficiency, streamline processes, and reduce the risk of fraud or errors. This can lead to cost savings, improved productivity, and better resource allocation. These audits can also identify and evaluate risks associated with financial reporting, internal controls, and compliance.

Investing in a robust GRC tech stack is an essential step toward SOX transformation that can enhance collaboration and provide a central data repository. Unlike spreadsheets, a GRC system propagates updates instantly. Once you put a change in one place, it populates everywhere. And the right technology reinforces best practices while adapting to your needs.

However, this technology entails a large up-front investment in software and infrastructure, as well as ongoing maintenance and training costs. SOX managed services models allow your staff and systems to connect to a proven, scalable, tailored technology platform that serves as a single source of truth, creating opportunities that can save your team time by facilitating document requests and providing multiple levels of reporting on demand.

Find a trusted team

In an era characterized by regulatory scrutiny and fiscal prudence, your organization will need to embrace innovative strategies to optimize compliance processes while minimizing costs. Managed service models for SOX compliance represent a paradigm shift that empowers businesses like yours to achieve regulatory excellence, operational efficiency, and sustainable growth.

It should be mentioned that outsourcing SOX does not absolve the company’s responsibility for compliance. The organization’s management is ultimately accountable for compliance regardless of whether it is outsourced or not. Therefore, it is essential for your leaders to carefully select a reputable and reliable firm for SOX managed services to ensure effective compliance management. SOX compliance is a necessary task for a public company, but it saps time and resources.

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This article was written by RSM US LLP and originally appeared on 2024-05-03.
2022 RSM US LLP. All rights reserved.

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