SOX Readiness Fundamentals : What CFOs Need to Know
May 25, 2025
SOX Readiness Fundamentals : What CFOs Need to Know
Going public brings a new level of accountability—and a much higher bar for your internal controls.
The Sarbanes-Oxley Act (SOX) requires CFOs and CEOs to certify whether internal control over financial reporting (ICFR) is effective. Your certification is grounded in reasonable assurance, a judgment-based standard, and it's also one that demands solid evidence.
Legacy consulting approaches have reduced SOX readiness to surface-level polishing of what's you already have in place. But auditors and regulators aren’t distracted by polish. They want to know: Are the controls designed appropriately? Are they operating consistently? And can management demonstrate that with confidence?
Meeting that bar requires more than documentation. It means embedding controls into how work actually gets done—integrating them into business processes and aligning them with real-world execution.
Where I’d Start as CFO
If I were in the CFO's seat, I would start with these elements commonly found in effective SOX 404 programs. Here's your "What to do" and "Why it matters".
People
What to do | Why it matters |
|---|---|
Hire professionals with current SOX and PCAOB inspection experience. | Aligns with auditor expectations, reducing rework, surprises, and disputes. |
Engage other functions early— HR, Legal, Tax, Operations. | Builds awareness and ownership. Avoids control gaps at critical handoffs. |
Risk Assessment
What to do | Why it matters |
|---|---|
Perform a balanced risk assessment to identify in-scope balances, IT systems, and third-party service organizations. | Over-scoping wastes time and dilutes focus. Under-scoping risks material weaknesses and regulatory exposure. |
Processes
What to do | Why it matters |
|---|---|
Map how things really work—not just the hoped for scenario. | If you miss real-world risks, your controls won’t cover them. |
Redesign and automate in stages and before control design and testing. | Transform the process to enable better and more efficient controls. Perform in stages to minimize disruption. |
Control Responsibilities
What to do | Why it matters |
|---|---|
Assign a clear owner for every control. | Ownership drives accountability. Without it, controls often fail in execution or design. |
Set clear expectations for control evidence. | Without expectations, controls may lack the evidence needed for testing and your attestation. |
Case Study: A Tale of Two Biotechs
Two biotech companies went public the same year. Same requirements. Very different outcomes.
In the first year of auditor attestation, Company A chose a longtime SOX practitioner to lead the effort—someone confident they could run the program independently. But this person’s experience was largely limited to a singular company, one not progressive in process or technology. This person’s approach relied heavily on templates, generic risk assessments, and controls. IT was involved only after control testing had begun, and controls over key industry estimates were poorly designed. The result: three material weakness, extensive rework, twelve months of remediation, and over $400K in unplanned advisory and audit overage fees.
Company B treated SOX as a broader operational initiative. Before going public, they created a cross-functional SOX steering committee, including experienced external advisors. Rather than jump straight to control documentation, they streamlined key processes and clarified handoffs. Their risk assessment covered industry-specific exposures, like clinical trial accruals. Functions like HR, IT, and Legal were engaged early and owned their respective controls. The result? One significant deficiency—but no material weaknesses. And a 30% reduction in testing burden the following year.
Closing Thought
SOX readiness isn’t about volume—it’s about intentionality. It’s not the number of controls, the length of your documentation, or the sophistication of your tools. What matters is whether controls address real risks, operate consistently, and leave behind clear evidence.
Companies that start early, prioritize process, and approach SOX as a cross-functional discipline are the ones that avoid rework, frustration, and regulatory surprises.
Make it real. Make it practical.
And make sure you can stand behind it—because your name will be.