Basic - 3 Part - Conflict of Interest, Employee Reporting... 3090

  • I am an amateur to the SOX Act though I have worked for publically traded companies for most of my life. The company I currently work for consistently uses SOX as an excuse for why something is done a certain way, but I struggle to find resourses to support their claims. My questions are as follows -

    1. Being in food service, I have always been responsible for purchasing, inventory, and the overall cost of the product I use, until now. I am told that I cannot be involved in purchasing or inventory of the product because of SOX. I cannot find where the SOX Act prohibits me from making purchasing decisions and tracking my inventory. Please advise.
    2. The company requires us to fill out a simple excel spreadsheet as we lose an employee, whether they were termed or quit. Can you explain the purpose for this as it specifically pertains to SOX?
    3. On a monthly basis I am required to answer several questions through an internet program called Policy IQ. The questions are easy for me to answer as the verbiage almost always contains the words ‘to the best of your knowledge’. I am a director with no signatory ability based on my position. To what extent can I be held accountable for the actions of others? I believe these questions are designed for the BOD to be able to pass responsibility on to others if there were ever to be an audit that turned up non-compliance issues.

  • Chef - welcome to the forum. You are asking good questions. The broad answer to what you are asking comes down to your company’s interpretation of SOX and the internal controls framework that it has adopted along with the level of materiality that your company is trying to mitigate risk over.
    In general, good internal controls guidelines would prohibit the same individual from having control over both purchasing and inventory counts as this would make it easy for an individual to misstate purchases or inventory to cover up wrong-doing.
    Good internal controls do require proper recordkeeping over employee hires, terminations, salary adjustments, etc. Reason for termination is good to have in case an employee attempts to accuse the company of wrongful termination or not being paid for the time when he/she was an employee.
    You are accountable for those who report up to you. You are also responsible to report any wrongdoing to the proper authorities within your organization. If you are aware of employee wrongdoing and do not report it properly within your organizations guidelines, then you are subject to the rules within your company for failure to report those wrongdoings.
    Adherance to SOX rules is very subjective. Each company must identify the controls that it feels are key to mitigating risk of material financial statement error or misstatement. Those controls are then monitored throught the year to ensure that they are operating effectively. It is quite possible that your company feels that certain controls and procedures need to be in place in order to certify that they are in complliance with SOX rules (there are NO specific controls written into the SOX rules - all specific rules or controls are set by each company based on its understanding and interpretation of the controls framework to which it has chosen to adhere).
    If you are concerned that specific controls are counter-productive, then I suggest that you speak with your internal audit department to try and gain a better understanding as to why certain rules have been put in place and to explain to them why you feel that the rules are counter-productive. Hopefully this communication will lead to better, more efficient guidelines within your company.

  • Just the info I was looking for. What a great resource. Thanks a million.

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