subsidiary - parent company communication 2024

  • hello everyone
    I wonder what you think of the following stuff in terms of SOX audit:
    Parent company (PC) signs a contract each year with subsidiaries (SC) where requirements are fixed (what PC requires in terms of revenue, costs, etc) for the following year. This contract is also a way of deploying company-level strategy down to the SC level.
    The process: SC recommends forecasts, actions plans, etc for next year, PC modifies if needed (according to budget and strategy plans), then the final contract is signed. SC should stick to this in the following year.
    PC is not SOX-compliant yet, neither are the SCs.
    This process should be made SOX compliant - is there any sense in it? This is only about communication and it wont affect financial reporting much…or will it? I wonder where to put controls in this process…
    I would be extremely grateful to hear some suggestions.
    (a newbie)

  • This sounds like a typical budgeting process. We have excluded this from our ICOFR scope, but have included it as part of our ELCs. We don’t do any detailed testing as to how information is pulled together to formulate an annual operating plan, bur we do ensure that the process is completed and that we have SR management sign-off every year.

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