Internal auditors generally use Sarbanes Oxley standards to cope with governance and risk management issues.
SOX is an act of 2002 enacted in the US. It is compliance and standard and enforcement for public companies. On the other hand, internal audit is a profession in which help is provided to an organization to achieve its objectives.
SOX vs Internal Audit
The difference between SOX and internal audit is that SOX focuses on creating accountability for financial statement preparation. On the other hand, internal audit focuses on safety, profitability, and efficiency. SOX Is not applied to private companies, whereas internal audit is applied to all organizations.
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The abbreviation for Sarbanes Oxley Act is SOX. In the United States, SOX is a federal law that aims to protect investors with the help of corporate disclosures that are mainly more accurate and reliable.
Internal audits generally evaluate a company’s internal control, including accounting processes and corporate governance. It ensures compliance with regulations and laws.
|Parameters of Comparison||SOX||Internal Audit|
|Interpretation||It is a law to protect investors from corporations engaged in fraudulent accounting activities.||It is a consulting activity, independent and objective assurance to improve and add value to an organization’s operation.|
|Concern||Financial reporting risk||Operational and financial risk|
|Focus||On creating accountability of financial statements preparation||On safety, profitability, and efficiency|
What is SOX?
The Sarbanes Oxley or simply SOX Act of 2002. In the United States, SOX is a federal law that mandates practices and financial records reporting for corporations and keeping them.
This act is commonly called SOX and is also known as the “Corporate and Auditing Accountability, Responsibility and Transparency Act” and “Public Company Accounting Reform and Investor Protection Act.”
SOX act protects investors by improving the reliability and accuracy of corporate disclosures. They are made under the purposes of securities laws and for others.
In response to major accounting and corporate scandals, such as WorldCom and Enron, this law was enacted. President George W. Bush signed the SOX law on July 30, 2002.
What is an Internal Audit?
Internal audit is an independent service that evaluates an organization’s corporate practices, internal controls, methods, and processes. It helps in securing compliance with several laws which apply to an organization.
The main purpose is to check the operational standards and effectiveness framed by an organization. An internal audit also helps to know whether employees follow the internal operational standards.
It also figures out whether there is an overrun of deliberate cost. Internal audit has a wider scope as it covers every aspect of a business, whether hiring or business strategy.
An organization can plug in financial leakage. The process enables the correction and identification of a lapse and procedures.
Main Differences Between SOX and Internal Audit
- SOX department designs the transaction level controls, as well as all controls, and reports on the operating effectiveness in place to manage, while internal audit departments perform operating effectiveness on independent assessment.
- SOX’s scope is limited to the financial statement preparation control. But internal audit has a wider scope as it covers every aspect of a business, whether hiring or business strategy.
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.