The Sarbanes-Oxley Act (SOX) of 2002 was enacted in response to major corporate accounting scandals at Enron, WorldCom, and Tyco. While primarily a financial regulation, SOX Section 404 requires publicly traded companies to establish and maintain internal controls over financial reporting (ICFR), which heavily involves IT systems. SOX IT controls are the technical safeguards that ensure the accuracy, integrity, and reliability of financial data processed by information systems. These controls apply to any IT system that generates, stores, processes, or transmits data used in financial statements.
SOX IT controls are typically categorized as IT General Controls (ITGCs) and application controls. ITGCs cover access management (user provisioning, authentication, authorization), change management (code reviews, deployment approvals, separation of duties), IT operations (job scheduling, backup and recovery, incident management), and program development (SDLC controls, testing requirements). Application controls are specific to individual financial applications and include input validation, processing controls, and output reconciliation. Organizations must document control objectives, implement control activities, test them regularly, and remediate deficiencies. External auditors evaluate the design and operating effectiveness of these controls as part of the annual financial audit. The PCAOB Auditing Standard No. 5 provides guidance on the integrated audit of financial statements and ICFR.
SOX non-compliance can result in criminal penalties including fines up to $5 million and imprisonment up to 20 years for executives who certify false financial statements. Material weaknesses in IT controls can trigger stock price declines, loss of investor confidence, and increased audit costs. For cybersecurity teams, SOX means rigorous access controls, change management processes, comprehensive audit logging, and documented procedures for every system touching financial data.