Difference Between Sox and Operational Audit
Sarbanes-Oxley Act of 2002 was passed by government as a reaction to the growing number of financial scandals in the big companies so that the interest of the investors can be safeguarded. Also known as Public Company Accounting Reform and Investor Protection Act, this is similar to Operational audit but there are many differences between the two.
After the seeing the devastating impact of the scandals on the economy and to get the confidence of the investors, a need for a strict law was felt and SOX or Sarbanes-Oxley Act came into existence. This law sets standards for public company boards and public accounting firms to regulate financial affairs as per the regulations of the law. PCAOB which is a public agency to regulate, inspect and oversee the auditing of the private companies came into existence as a result of this act. This act holds the corporate boards accountable for keeping a check on the financial irregularities.
It is said that SOX has hampered the financial edge which was enjoyed by US over the financial service providers from other countries but the supporters of the law believe that this law would not only rein the financial irregularities and the confidence of the common man has increased in the financial markets.
Operational Audit is used for checking the financial systems and procedures of a company and gives fair opinions about the financial status of a company. This audit is done by qualified accountants and mostly handed over to renowned accounting firms. This audit is a great way to check if a company is using its resources efficiently or not. Regular audits of a company are performed by their own financial analysts but operational audit aims to check all the procedures and working in a deeper sense and bring out any misuse of the resources or inefficiency. This audit helps the companies to overcome procedural delays highlighted in operational audit.
Below mentioned points will highlight the differences between the two:
- SOX is statutory while operational audit is for keeping an internal check on a company.
- SOX aim to bring out the weaknesses in the system for internal control while operation audit aims to keep a check on inefficient procedures.
- SOX is for safeguarding the interest of the people who have invested in a company and the company must be listed on stock exchange while operational audit is for all the companies whether or not they are registered on stock exchange.
The aim of SOX is fixed while the aim of operational audit can be changed according to the management of the company.