SOX or Sarbanes-Oxley Act is a law that sets principles of conduct and regulations for public accounting firms and public company boards. The law was passed to improve the confidence of the investors so they can continue to invest in the United States security markets. The law also allows the creation of a public agency known as PCAOB.
This agency was created to regulate, oversee, and to audit public companies. The agency is also empowered to discipline officials of any public company that are involved in any financial irregularities. However, SOX is only applicable to public companies in the United States. On the other hand, operational audit makes use of accountants from reliable accounting firms to carry out audits of corporations and companies to check their financial systems.
The operational audit also helps check a company’s financial effectiveness and efficiency. Unlike the operational audit, SOX is compulsory for all public companies. Operational audit is for all companies, whereas SOX is carried out for public companies alone.
SOX stands for the Sarbanes Oxley Act. It is a strict law that enacts financial regulations standards among public company boards and public accounting firms. It was set up in the stir of financial scandals that had a maximum impact on the economy and investor confidence in the nation's security markets worldwide. Those who are not in favor of SOX will say that SOX has diminished the United States' competitive nature. SOX is statutory by nature.
On the other hand, an operations audit is an application put into operation to check a company's financial systems and practices. It gives unbiased opinions concerning the productivity of the company. It is typically conducted by accountants from certified accounting firms and offers the company how well it is employing its resources. An operational audit is a more significant inspection and assessment of the functioning of the company. It can also help the company to prepare for or overcome procedural delays.
The number one difference between SOX and Operational Audit is that the former is an external audit while the latter is an internal audit. The two types of audits were created to ensure that the investments of the investors are safe, and to boost the confidence of the investors. SOX, also known as the Public Company Accounting Reform and Investor Protect Act, is a law made to help companies regulate and oversee their financial statement. SOX is an external audit because it is carried out by external auditors. The external auditors cannot be employees of the same company; they have to come from outside. The act also spells out some consequences for the senior officers of any companies that engage in any financial irregularities. An operational audit is carried out by professional accountants to check the financial systems of a company. Operational audits allow companies to detect any inefficiency in their internal operations.
SOX and operational are two types of audits that are related to the financial world. SOX stands for Sarbanes-Oxley Act. It has been around since 2002. They differ in the type of audit that it is. SOX is defined as an external audit. It is required by the Securities and Exchange Commission.
This is compared to operational audits, in which the audit is more comprehensive. Another difference between them is what companies the audit is for. Operational audits are for all types of companies, but SOX is only for companies that are US stock listed. It is important to keep the interests of the investors safe.
One thing that you should know is that operational audit will not focus on internal controls. SOX is used in order to bring out the different weaknesses that are associated with internal control. This is also meant to make sure that the interests of the investors will be properly protected. For stock listed companies, this is considered to be mandatory. The main goal of both SOX and operational audits are they would make sure that the impact of financial scandals will be lessened considerably. Financial reporting is very important for these two types of processes. The SOX control rule will make sure that errors will be easily detected so that they can be stopped.