The practice ensures that financial reporting systems adhere to the stringent requirements outlined in the Sarbanes-Oxley Act. This process encompasses a range of activities, including assessing system controls, validating data integrity, and verifying the accuracy of financial outputs. For example, confirming that access controls effectively limit unauthorized modifications to accounting data falls under this type of evaluation.
Its significance lies in maintaining the transparency and reliability of financial information, thereby safeguarding investor confidence. Historically, its rise corresponds with the increased scrutiny placed on corporate governance following major accounting scandals. Its proper execution helps organizations mitigate risks of fraud and errors, leading to increased operational efficiency and reduced audit costs.
