SOX
U.S. law mandating internal controls over financial reporting
ISO/IEC 42001:2023
International standard for AI management systems.
Quick Verdict
SOX mandates financial reporting controls for U.S. public firms with severe penalties, while ISO/IEC 42001:2023 offers voluntary AI governance certification globally. Companies adopt SOX for legal compliance; ISO 42001 for ethical AI trust and market differentiation.
SOX
Sarbanes-Oxley Act of 2002
Key Features
- Mandates CEO/CFO certification of financial reports (Section 302)
- Requires ICFR assessment and auditor attestation (Section 404)
- Establishes PCAOB for audit firm oversight and inspections
- Enforces auditor independence and partner rotation rules
- Imposes criminal penalties for document tampering and fraud
ISO/IEC 42001:2023
ISO/IEC 42001:2023 AI Management Systems
Key Features
- PDCA framework for AI lifecycle governance
- Mandatory AI Impact Assessments for high-risk AI
- 38 Annex A controls for AI-specific risks
- HLS integration with ISO 27001/9001 standards
- Third-party risk management and monitoring
Detailed Analysis
A comprehensive look at the specific requirements, scope, and impact of each standard.
SOX Details
What It Is
The Sarbanes-Oxley Act of 2002 (SOX) is a U.S. federal regulation enacted post-Enron scandals to enhance corporate accountability. It mandates accurate financial disclosures via risk-based internal controls over financial reporting (ICFR), enforced through SEC rules and PCAOB standards.
Key Components
- 11 Titles covering PCAOB creation (Title I), auditor independence (Title II), certifications (Sections 302/906), ICFR assessments (Section 404), and penalties (Sections 802/806).
- Built on COSO framework for control design.
- Compliance model includes management assertions, auditor attestations for accelerated filers, and criminal enforcement.
Why Organizations Use It
Public companies comply to avoid fines, imprisonment, restatements, and delisting. Benefits include investor trust, reduced fraud risk, operational efficiency, and M&A readiness. Enhances governance and lowers cost of capital.
Implementation Overview
Top-down, risk-based approach: scope material accounts, document key controls (ITGC, entity-level), test effectiveness, remediate deficiencies. Applies to U.S.-listed firms; phased over 12-24 months with annual cycles and external audits.
ISO/IEC 42001:2023 Details
What It Is
ISO/IEC 42001:2023 is the world's first international standard for establishing, implementing, maintaining, and improving an Artificial Intelligence Management System (AIMS). It provides a PDCA-based framework to manage AI risks and opportunities across the full lifecycle, applicable to any organization involved in AI development, provision, or use.
Key Components
- Clauses 4-10 cover context, leadership, planning, support, operation, evaluation, and improvement.
- Annex A includes 38 AI-specific controls for data, transparency, integrity, and resiliency.
- Built on High-Level Structure (HLS) for integration with ISO 9001/27001.
- Third-party certification via accredited audits.
Why Organizations Use It
- Mitigates AI risks like bias, model drift, and ethics issues.
- Aligns with regulations (e.g., EU AI Act) and builds trust.
- Drives innovation, compliance, and competitive edge via reputation enhancement.
Implementation Overview
- Phased gap analysis, risk assessments, training, and audits.
- 6-12 months typical; suits all sizes/sectors globally.
- Requires leadership commitment and AI Impact Assessments (AIIAs).
Key Differences
| Aspect | SOX | ISO/IEC 42001:2023 |
|---|---|---|
| Scope | Financial reporting internal controls (ICFR) | AI management systems lifecycle governance |
| Industry | U.S. public companies, all sectors | All organizations, any sector globally |
| Nature | Mandatory U.S. federal law with PCAOB enforcement | Voluntary international certification standard |
| Testing | Annual ICFR audits by external auditors | Internal audits, management reviews, certification |
| Penalties | Criminal fines up to $5M, 20 years imprisonment | No legal penalties, loss of certification |
Scope
Industry
Nature
Testing
Penalties
Frequently Asked Questions
Common questions about SOX and ISO/IEC 42001:2023
SOX FAQ
ISO/IEC 42001:2023 FAQ
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