Top 3 Sarbanes-Oxley Considerations for IPOs

Going public is more than just a milestone, it’s a transformation. With greater visibility comes higher expectations and, of course, increased scrutiny. One of the biggest hurdles in that transition? The Sarbanes-Oxley Act (SOX).  

SOX compliance isn’t just a legal requirement, it’s a signal to investors that your company takes financial integrity seriously. Getting ahead of it can accelerate your IPO timeline and reduce risk.  

Here are three key areas every company should focus on as they prepare to go public: 

1. Establish Robust Internal Controls Over Financial Reporting (ICFR) 

SOX Section 404 requires management to review and report on the effectiveness of the company’s ICFR. That might sound mundane, but it’s critical and doable. In practical terms, this looks like: 

• Start with a risk assessment. Identify risks that could lead to material misstatements in your financial statements. 

• Design, document and implement strong controls. Your controls should directly address those risks and ensure data accuracy and reliability. 

• Identify third party service providers. Often an afterthought, but it is important to identify applicable third-party service providers early so that SOC reports can be obtained and reviewed.  

• Perform regular testing and monitoring: Continuously test and monitor controls to confirm their effectiveness; make improvements as necessary.​ 

​Companies that get their ICFR in order early shows the market they’re serious about financial oversight and helps avoid last-minute scrambles. 

2. Strengthen Corporate Governance  

Governance isn’t just about checking a box; it’s a strategic signal to the market. Investors and regulators want assurance that your company is governed with integrity, transparency, and strong oversight. 

Focus on these key steps: 

• Build a well-structured, independent board. Independence and expertise matter especially when it comes to overseeing management objectively. 

• Form an audit committee. This group, made up of independent directors, plays a central role in financial reporting oversight. 

• Establish a clear Code of Ethics: Implement a code that promotes ethical conduct and compliance with legal standards. 

• Implement a real whistleblower policy. Employees need safe, confidential ways to raise concerns without fear of retaliation. 

Strong governance boosts market confidence and helps avoid surprises post-IPO. 

3. Don’t Overlook Information Technology (IT) Controls 

Behind every financial statement is a network of systems. If those systems aren’t secure, neither is your data. SOX mandates IT controls that safeguard financial information and uphold data integrity. 

Here’s where to focus your efforts: 

• Access Controls: Only the right people should have access to sensitive financial systems and data.  

• Data Security: Protect against breaches and unauthorized access with strong, layered defenses.  

• System Integrity: Your core systems should be stable, reliable, and well-maintained, especially those that feed into your financial reporting. 

Small tech slip-ups can snowball into major compliance problems. Tackle them early to avoid costly fixes later. 

Start Early and Don’t Go It Alone 

SOX compliance can feel overwhelming, but it doesn’t have to be. Starting early gives your company time to build a thoughtful, tailored plan. And bringing in experienced advisors can make the process smoother and more strategic. 

At Sikich, our internal audit team helps companies navigate SOX from pre-IPO prep to ongoing compliance. Whether you’re looking for a second set of eyes or full-scale support, we’re here to help. Please reach out to Maitri Jani or your current contact within our internal audit team.