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Risk & Controls

Addressing SOX Compliance Challenges With Workiva

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Here's a fun fact – the Sarbanes-Oxley Act of 2002 is 66 pages long, mostly in fine print of indeterminate font. It's dense, complex, and still challenging to implement, a good two decades since it first saw the light of day.

Thankfully, although SOX compliance hasn't gotten any less complex or dense, the tools companies have available to get and stay compliant have evolved light-years in just the last few years alone. So, to expand on our comparison of the best SOX compliance software, we now want to take a closer look at how our preferred SOX compliance solution – Workiva – can help you address some of the most common SOX-related pain points.

Common SOX Challenges

Before jumping headfirst into our list of challenges, we have a caveat to throw your way. Companies are like fingerprints, where no two are exactly alike. Therefore, what one business deems a challenge could be a cakewalk for another. There are simply too many variables involved to paint every enterprise with the same brush, including the size and complexity of a company, the nature of operations, internal resources, capabilities, and countless others.

Likewise, what constitutes a challenge can significantly change over the corporate lifespan. For example, a smaller company might find resource constraints its most significant SOX compliance challenge. Meanwhile, a larger company with far deeper pockets won't face those same constraints, yet might struggle mightily with adequate IT controls across its sprawling data infrastructure and systems.

The point is, we've picked four common challenges many public companies – but not all – run into when implementing, maintaining, or scaling SOX compliance efforts. However, our overarching intent with these insights isn't so much the specific use cases we've chosen but how the Workiva platform can provide solutions for even the most complicated and expansive SOX compliance programs. Now, with that out of the way, let's dive right in.

Manual Processes and Controls Testing

To state the obvious, manual processes can be kryptonite to any finance organization. Without much prodding, they can quickly result in errors, bottlenecks, silos, and a cavalcade of other inefficiencies that can bring an entire enterprise to its knees. And if a company happens to use such manual processes in something as complex as SOX compliance, the outcome usually won't be pleasant.

Thus, an old-school, manually intensive approach to SOX testing – including walk-throughs, screenshots, and spreadsheet tracking – will inevitably strain resources and needlessly amplify compliance risk. Simply attempting to manually validate hundreds of key controls across multiple processes and entities will consume an Everest-sized mountain of staff hours, and that's not a good look since you still have a company to run.

Further, relying on a hodgepodge of tribal knowledge will skewer your productivity as turnover eats away at your institutional knowledge. And with no centralized compliance system reining everything in, evidence collection is inconsistent and disorganized at best. As a result, controls testing gets continually delayed as companies try to hold everything together with duct tape and long hours, leaving little room for remediation before the external auditors are knocking at the front door.

Meanwhile, a lack of real-time visibility into the health of the control environment means deficiencies can go unchecked for months. As you might guess, without uniformity and standardized procedures across departments, that lack of visibility grows even more acute, making a bad situation worse.

Fast forwarding a bit, once it's time for the external audit, all of these shortcomings, inconsistencies, and inefficiencies come home to roost, leaving teams with yet another mountain of rework – not to mention scrutiny – during the audit. Of course, none of this gives stakeholders much confidence in a company's financial reporting integrity, leading to even bigger, more existential issues for leadership.

Workiva and Manual Processes

Workiva provides a centralized platform to automate and streamline once manual SOX testing activities. Built-in connectors can pull control data and evidence directly from downstream systems like ERPs in real-time. Automated control certifications and continuous metrics can then replace periodic manual reviews, making everyone's life easier.

More importantly, thanks to these automated certifications, teams can meet deadlines, boost compliance, and easily view evidence request statuses, all from the comfy confines of a real-time dashboard that effectively serves as an invaluable SOX compliance checklist for you.

With Workiva, high-risk areas get continuous monitoring while low-risk controls are intelligently sampled. Decision-makers can use real-time dashboards to monitor control health across the entire organization. Meanwhile, you can use risk-based workflow prioritization to focus manual testing on areas you have not yet automated. Together, these functionalities reduce redundant testing, enhance visibility, and free up teams for more strategic initiatives.

Weak IT General Controls

Shortcomings in foundational IT general controls (ITGCs) are one of the most widespread and difficult challenges for SOX compliance programs to deal with. Fundamental ITGCs often span program change management, access controls, data center controls, computer operations, and more, leaving leadership with a contagion that's difficult to corral.

Unfortunately, when ITGCs falter, the reliability of financially relevant applications and data can go right out the window. The intricacies of modern IT ecosystems can further obscure transparency for compliance teams, with countless interconnected systems and indirect or shared control ownership masking accountability behind a thick layer of fog.

Since many companies lack specialized internal IT expertise, SOX groups often struggle to proactively identify and interpret ITGC implications, typically relying on after-the-fact remediation. And tech teams grappling with competing priorities and limited resources don't help matters. Therefore, weak controls can persist for stretches of time, allowing excessive user access privileges, undocumented changes, and financial data integrity issues to flourish. And that's not good.

From there, downstream automated controls and reports fail yet remain faulty thanks to unsupported IT foundations. Yes, external audits identify such deficiencies, but do you really want that to be your backstop? Probably not.

Workiva and IT Controls

Workiva enhances ITGCs through embedded security protocols like access controls, permissions, segregation of duties, and detailed audit trails. Change management is also strengthened through structured workflows, version control, and permissions on changes to ITGC documentation.

Once again, real-time dashboards create a window into ITGC health, while drill-down assessments identify specific deficiencies. Collaborative action plans route control gaps to responsible teams for remediation while expert content provides standards for common ITGCs and tests. Collectively, these Workiva capabilities bolster control transparency, accountability, and maturity.

Resource Constraints

Effective SOX compliance requires a team of knowledgeable professionals who can faithfully execute key program aspects like testing coverage, control monitoring, documentation updates, issue remediation, and audit support. However, as we've seen recently, budgets get thinner and specialized skill sets more scarce, stretching out resources and teams until they're razor thin.

Oftentimes, departmental jacks-of-all-trade will juggle multiple responsibilities which leads to limited testing coverage, outdated documentation, and inadequate monitoring. As a result, people quickly burn out and either start phoning it in or quit altogether, further exacerbating resource challenges.

On the technology side, resource constraints prevent companies from investing in technology upgrades that could streamline critical SOX processes. Instead, manual spreadsheets and generic collaboration tools strain to handle quickly intensifying SOX needs. Without the resource cavalry charging up the hill, this vicious cycle allows risks to go undetected and erodes program maturity over time.

Like it or not, without specialized personnel and modern technology, even the strongest teams will eventually falter under such immense stress and workloads. And everything just goes downhill from there.

Workiva and Resource Constraints

Workiva amplifies limited SOX compliance resources through automated testing, straightforward configuration, and multilayered team functionality that lets you allocate work across various roles. In other words, Workiva makes the most of what you have. And then some.

Also, Workiva's centralized data minimizes redundant manual efforts, while data dashboards reduce management demands on overtaxed teams, creating a win-win for everyone involved. On top of all that, Workiva's extensive partner network provides on-demand assistance when you need specialized skills lacking in your in-house team.

Control Documentation Issues

Maintaining accurate and current control documentation is essential for SOX readiness, serving as a foundation for testing and remediation. However, ensuring documentation continuously aligns with actual processes, systems, and controls can be enormously challenging.

Inflexible, static narratives can quickly deviate from today's dynamic business processes. And as controls evolve, related tests fail to keep pace. Add in the absence of an organized version control to the mix and you have a recipe for disaster, where your people can't tell current, authoritative controls from outdated ones.

The ever-increasing volume of data in today's digitally driven operations makes matters even more challenging. Regulations are changing at such a rapid clip, forcing companies to constantly update their documentation, adding yet more fuel to the fire. A lack of disciplined documentation can lead to serious – but preventable – audit deficiencies.

Workiva and Control Documentation

Workiva helps connect the dots between risks, controls, tests, deficiencies, and remediation tasks, all within a single integrated platform. Its robust version control also ensures your teams work from the correct documents at all times. The platform provides automated updates based on process changes to perpetually maintain accurate testing and control information. And since the platform makes these updates at the source, they’re instantly reflected in all documents, including:

  • Risk control matrices
  • Process narratives
  • Flowcharts
  • Dashboards
  • SOX testing documents
  • Audit committee testing presentations

Oh, the beauty of being able to rely on a single source of truth. All told, Workiva's control documentation functionality results in improved testing alignment, greater transparency, and enhanced audit defensibility.

A Final Word from Embark

With such distinct capabilities and advantages, it’s tough not to constantly evangelize for such a potentially game-changing SOX compliance solution. The bottom line – we've found great success using Workiva for clients' Sarbanes-Oxley compliance, and we want others to experience the same results.

That said, we still recommend doing your own due diligence to find a SOX compliance platform that suits your specific needs best. And if you have any questions or concerns along the way – on Workiva, SOX, or anything else – you know where to find us.

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