What's the recommended timeline for a company with a Dec 31 year-end that went public through a SPAC (special purpose acquisition company) in January to June and is subject to SOX 404B? Why is it critical to nail quarterly controls? What are the windows of opportunity to implement quarterly controls?
I suggest you watch the video. It’s easier to understand if you are a visual/audio leaner. The content below is the same as the video. It’s for those who learn by reading.
- Risk Assessments (business and IT)
- Status Updates - Project Management
- Process Owner Training
- Entry Level Controls
- Equity & Stock Admin
- Financial Close & Reporting
- Fixed Assets
- HR & Payroll
- Treasury Cash Mgt
- IT General Controls
- Four areas: (1) access controls ; (2) change management; (3) system development; (4) computer operations
Early April: Q1 close
End of April to early May: Interview and assess current processes
2nd week of May: Analyze control gaps
3rd week of May: Making recommendations
End of May: Document controls
June: Conduct walk-throughs
July: Q2 close; implement changes for quarter-end controls (e.g. account reconciliations, reserve analysis)
August to early September: Testing – activity from Jan 1 to Jun 30
Mid-September to mid-October: Implement changes, especially for quarter-end controls
October: Q3 close
November to early December: Testing activity from Jul 1 to Sep 30
December to mid-January: Implement changes, especially for quarter-end controls
January: Year-end close
February: Testing - round 3 - testing controls that happen once a year, e.g. 10K filing
- Project management, process owner training, and change management are critical during the first year as a public company. It is important to focus on training and education for a company whose employees haven’t worked in a SOX environment before.
- External auditors are looking for two consecutive quarters of effective quarterly controls as close to your year-end as possible. Ideally you have a walk-through during the second quarter to work out any kinks you may have.
- At year-end, external auditors will assess your controls as of December 31st to ensure they are designed appropriately, in place, and operating effectively. If a series of controls fails, they can aggregate together and become a material weakness.