sox-controls.ts•25.6 kB
import { CellValue } from '../excel/excel-manager.js';
export interface SOXControl {
controlId: string;
controlName: string;
controlObjective: string;
controlType: 'preventive' | 'detective' | 'corrective';
frequency: 'daily' | 'weekly' | 'monthly' | 'quarterly' | 'annually' | 'event_driven';
owner: string;
riskRating: 'high' | 'medium' | 'low';
process: string;
controlActivity: string;
evidence: string[];
lastTestDate?: string;
nextTestDate?: string;
status: 'effective' | 'ineffective' | 'not_tested' | 'requires_remediation';
}
export interface ControlTest {
testId: string;
controlId: string;
testDate: string;
tester: string;
testProcedure: string;
sampleSize: number;
populationSize: number;
deficiencies: ControlDeficiency[];
conclusion: 'effective' | 'ineffective' | 'requires_remediation';
managementResponse?: string;
remediationPlan?: string;
retestDate?: string;
}
export interface ControlDeficiency {
deficiencyId: string;
description: string;
severity: 'significant_deficiency' | 'material_weakness' | 'minor_deficiency';
rootCause: string;
potentialImpact: string;
managementResponse: string;
remediationDeadline: string;
status: 'open' | 'in_progress' | 'resolved';
}
export interface SOXComplianceResult {
compliancePeriod: string;
totalControls: number;
testedControls: number;
effectiveControls: number;
deficientControls: number;
controlsByProcess: { [process: string]: number };
controlsByRisk: { [risk: string]: number };
deficiencySummary: {
materialWeaknesses: number;
significantDeficiencies: number;
minorDeficiencies: number;
};
overallAssessment: 'effective' | 'ineffective' | 'requires_improvement';
executiveSummary: string[];
recommendations: string[];
}
export class SOXControlsEngine {
private calculateSampleSize(populationSize: number, confidenceLevel: number = 0.95): number {
// Simplified sample size calculation for SOX testing
// In practice, would use more sophisticated statistical sampling
const zScore = confidenceLevel === 0.95 ? 1.96 :
confidenceLevel === 0.90 ? 1.645 : 1.96;
const margin = 0.05; // 5% margin of error
const proportion = 0.5; // Conservative estimate
const numerator = zScore * zScore * proportion * (1 - proportion);
const denominator = margin * margin;
let sampleSize = numerator / denominator;
// Finite population correction
if (populationSize < 10000) {
sampleSize = sampleSize / (1 + (sampleSize - 1) / populationSize);
}
// Minimum sample sizes for SOX compliance
if (populationSize <= 10) return Math.min(populationSize, 5);
if (populationSize <= 25) return Math.min(populationSize, 10);
if (populationSize <= 100) return Math.min(populationSize, 25);
return Math.max(25, Math.ceil(sampleSize));
}
// Available for detailed control effectiveness assessment
// @ts-ignore - Method available for future use
private assessControlEffectiveness(_control: SOXControl, test: ControlTest): string {
const deficiencyCount = test.deficiencies.length;
const errorRate = deficiencyCount / test.sampleSize;
// SOX effectiveness criteria
if (deficiencyCount === 0) {
return 'Control operating effectively';
}
if (errorRate <= 0.05 && !test.deficiencies.some(d => d.severity === 'material_weakness')) {
return 'Control operating effectively with minor exceptions';
}
if (test.deficiencies.some(d => d.severity === 'material_weakness')) {
return 'Material weakness identified - control ineffective';
}
if (test.deficiencies.some(d => d.severity === 'significant_deficiency') || errorRate > 0.10) {
return 'Significant deficiency identified - control requires remediation';
}
return 'Control operating effectively with exceptions to be monitored';
}
private generateControlTestProcedures(control: SOXControl): string[] {
const procedures: string[] = [];
switch (control.controlType) {
case 'preventive':
procedures.push('1. Obtain understanding of the preventive control design');
procedures.push('2. Test control implementation through inquiry and observation');
procedures.push('3. Select sample of transactions/events to test control operation');
procedures.push('4. Verify control operates as designed to prevent errors/fraud');
procedures.push('5. Test exception handling and override procedures');
break;
case 'detective':
procedures.push('1. Understand the detective control design and timing');
procedures.push('2. Test the control\'s ability to detect errors or irregularities');
procedures.push('3. Verify timely identification and reporting of exceptions');
procedures.push('4. Test follow-up procedures for detected issues');
procedures.push('5. Validate control evidence and documentation');
break;
case 'corrective':
procedures.push('1. Test the identification and escalation of control failures');
procedures.push('2. Verify timely corrective actions are implemented');
procedures.push('3. Test root cause analysis procedures');
procedures.push('4. Validate remediation effectiveness');
procedures.push('5. Test prevention of similar future occurrences');
break;
}
// Add specific procedures based on control frequency
if (control.frequency === 'daily' || control.frequency === 'weekly') {
procedures.push('6. Test multiple periods to ensure consistent operation');
}
if (control.riskRating === 'high') {
procedures.push('7. Perform additional substantive testing due to high risk rating');
procedures.push('8. Test control environment factors supporting this control');
}
procedures.push('9. Document all testing procedures and results');
procedures.push('10. Evaluate overall control effectiveness and communicate results');
return procedures;
}
testSOXControl(control: SOXControl, testParameters: {
tester: string;
testDate?: string;
sampleSize?: number;
populationSize: number;
customProcedures?: string[];
}): ControlTest {
const testDate = testParameters.testDate || new Date().toISOString().split('T')[0];
const sampleSize = testParameters.sampleSize || this.calculateSampleSize(testParameters.populationSize);
// Generate standard test procedures
const procedures = testParameters.customProcedures || this.generateControlTestProcedures(control);
// Simulate control testing (in production, this would interface with actual testing)
const simulatedDeficiencies: ControlDeficiency[] = [];
// Simulate finding deficiencies based on control risk and effectiveness
const deficiencyProbability = control.riskRating === 'high' ? 0.15 :
control.riskRating === 'medium' ? 0.08 : 0.03;
if (Math.random() < deficiencyProbability) {
const severity = control.riskRating === 'high' && Math.random() < 0.3 ? 'material_weakness' :
control.riskRating === 'high' && Math.random() < 0.6 ? 'significant_deficiency' :
'minor_deficiency';
simulatedDeficiencies.push({
deficiencyId: `DEF-${control.controlId}-${Date.now()}`,
description: `Control testing identified exception in ${control.controlActivity}`,
severity,
rootCause: 'Control not performed as designed',
potentialImpact: severity === 'material_weakness' ?
'Could result in material misstatement in financial statements' :
'Could result in errors that may not be detected timely',
managementResponse: 'Management will implement corrective action plan',
remediationDeadline: new Date(Date.now() + 30 * 24 * 60 * 60 * 1000).toISOString().split('T')[0],
status: 'open'
});
}
const conclusion = simulatedDeficiencies.some(d => d.severity === 'material_weakness') ? 'ineffective' :
simulatedDeficiencies.some(d => d.severity === 'significant_deficiency') ? 'requires_remediation' :
'effective';
return {
testId: `TEST-${control.controlId}-${Date.now()}`,
controlId: control.controlId,
testDate,
tester: testParameters.tester,
testProcedure: procedures.join('\n'),
sampleSize,
populationSize: testParameters.populationSize,
deficiencies: simulatedDeficiencies,
conclusion,
managementResponse: conclusion !== 'effective' ?
'Management acknowledges the testing results and will implement corrective actions' : undefined,
remediationPlan: conclusion !== 'effective' ?
'Detailed remediation plan to be developed within 15 days' : undefined,
retestDate: conclusion !== 'effective' ?
new Date(Date.now() + 60 * 24 * 60 * 60 * 1000).toISOString().split('T')[0] : undefined
};
}
assessSOXCompliance(controls: SOXControl[], tests: ControlTest[]): SOXComplianceResult {
const totalControls = controls.length;
const testedControls = tests.length;
const effectiveControls = tests.filter(t => t.conclusion === 'effective').length;
const deficientControls = tests.filter(t => t.conclusion !== 'effective').length;
// Aggregate by process
const controlsByProcess: { [process: string]: number } = {};
controls.forEach(control => {
controlsByProcess[control.process] = (controlsByProcess[control.process] || 0) + 1;
});
// Aggregate by risk
const controlsByRisk: { [risk: string]: number } = {};
controls.forEach(control => {
controlsByRisk[control.riskRating] = (controlsByRisk[control.riskRating] || 0) + 1;
});
// Count deficiencies by severity
const allDeficiencies = tests.flatMap(t => t.deficiencies);
const deficiencySummary = {
materialWeaknesses: allDeficiencies.filter(d => d.severity === 'material_weakness').length,
significantDeficiencies: allDeficiencies.filter(d => d.severity === 'significant_deficiency').length,
minorDeficiencies: allDeficiencies.filter(d => d.severity === 'minor_deficiency').length
};
// Overall assessment
let overallAssessment: 'effective' | 'ineffective' | 'requires_improvement';
if (deficiencySummary.materialWeaknesses > 0) {
overallAssessment = 'ineffective';
} else if (deficiencySummary.significantDeficiencies > 0 || deficientControls / testedControls > 0.1) {
overallAssessment = 'requires_improvement';
} else {
overallAssessment = 'effective';
}
// Generate executive summary
const executiveSummary: string[] = [];
executiveSummary.push(`SOX compliance assessment completed for ${totalControls} controls across ${Object.keys(controlsByProcess).length} processes`);
executiveSummary.push(`${testedControls} controls tested (${((testedControls / totalControls) * 100).toFixed(1)}% coverage)`);
executiveSummary.push(`${effectiveControls} controls operating effectively (${((effectiveControls / testedControls) * 100).toFixed(1)}% effectiveness rate)`);
if (deficiencySummary.materialWeaknesses > 0) {
executiveSummary.push(`⚠️ CRITICAL: ${deficiencySummary.materialWeaknesses} material weakness(es) identified requiring immediate remediation`);
}
if (deficiencySummary.significantDeficiencies > 0) {
executiveSummary.push(`${deficiencySummary.significantDeficiencies} significant deficiency(ies) identified requiring management attention`);
}
// Generate recommendations
const recommendations: string[] = [];
if (overallAssessment === 'ineffective') {
recommendations.push('Immediate remediation required for material weaknesses before financial statement certification');
recommendations.push('Enhanced monitoring and testing required for all high-risk controls');
recommendations.push('Consider engaging external SOX specialists for remediation support');
}
if (overallAssessment === 'requires_improvement') {
recommendations.push('Develop comprehensive corrective action plans for significant deficiencies');
recommendations.push('Increase frequency of control monitoring and testing');
recommendations.push('Consider process improvements to address root causes');
}
if (testedControls / totalControls < 0.8) {
recommendations.push('Increase control testing coverage to ensure comprehensive assessment');
}
const highRiskUntested = controls.filter(c =>
c.riskRating === 'high' && !tests.some(t => t.controlId === c.controlId)
).length;
if (highRiskUntested > 0) {
recommendations.push(`Priority testing needed for ${highRiskUntested} untested high-risk controls`);
}
recommendations.push('Continue ongoing monitoring and periodic reassessment of control effectiveness');
return {
compliancePeriod: new Date().getFullYear().toString(),
totalControls,
testedControls,
effectiveControls,
deficientControls,
controlsByProcess,
controlsByRisk,
deficiencySummary,
overallAssessment,
executiveSummary,
recommendations
};
}
generateSOXComplianceWorksheet(
controls: SOXControl[],
tests: ControlTest[],
assessment: SOXComplianceResult
): Array<Array<CellValue | string | number>> {
const worksheet: Array<Array<CellValue | string | number>> = [];
// Header
worksheet.push(['SOX CONTROLS COMPLIANCE ASSESSMENT', '', '', '', '', '', '', '', '', '']);
worksheet.push(['Sarbanes-Oxley Act Section 404 - Internal Control Assessment', '', '', '', '', '', '', '', '', '']);
worksheet.push([`Assessment Period: ${assessment.compliancePeriod}`, '', '', '', '', '', '', '', '', '']);
worksheet.push([`Generated: ${new Date().toLocaleDateString()}`, '', '', '', '', '', '', '', '', '']);
worksheet.push(['', '', '', '', '', '', '', '', '', '']);
// Executive Summary
worksheet.push(['🎯 EXECUTIVE SUMMARY', '', '', '', '', '', '', '', '', '']);
worksheet.push(['Metric', 'Value', 'Status', 'Benchmark', 'Assessment', '', '', '', '', '']);
worksheet.push(['Overall SOX Compliance',
assessment.overallAssessment.toUpperCase(),
assessment.overallAssessment === 'effective' ? '✅ Pass' : '❌ Fail',
'Effective required',
assessment.overallAssessment === 'effective' ? 'Meets requirements' : 'Requires action'
]);
worksheet.push(['Total Controls',
assessment.totalControls,
'Complete',
'Full population',
'Control population documented'
]);
worksheet.push(['Controls Tested',
`${assessment.testedControls}/${assessment.totalControls}`,
assessment.testedControls / assessment.totalControls >= 0.8 ? '✅ Adequate' : '⚠️ Low',
'≥80% coverage',
((assessment.testedControls / assessment.totalControls) * 100).toFixed(1) + '% coverage'
]);
worksheet.push(['Effective Controls',
`${assessment.effectiveControls}/${assessment.testedControls}`,
assessment.effectiveControls / assessment.testedControls >= 0.95 ? '✅ Strong' : '⚠️ Weak',
'≥95% effectiveness',
((assessment.effectiveControls / assessment.testedControls) * 100).toFixed(1) + '% effective'
]);
worksheet.push(['Material Weaknesses',
assessment.deficiencySummary.materialWeaknesses,
assessment.deficiencySummary.materialWeaknesses === 0 ? '✅ None' : '❌ Found',
'Zero required',
assessment.deficiencySummary.materialWeaknesses === 0 ? 'Compliant' : 'Non-compliant'
]);
worksheet.push(['', '', '', '', '', '', '', '', '', '']);
// Control Population Analysis
worksheet.push(['📊 CONTROL POPULATION ANALYSIS', '', '', '', '', '', '', '', '', '']);
worksheet.push(['Process', 'Control Count', 'Tested', 'Effective', 'Deficient', 'Effectiveness %', '', '', '', '']);
for (const [process, count] of Object.entries(assessment.controlsByProcess)) {
const processControls = controls.filter(c => c.process === process);
const processTests = tests.filter(t => processControls.some(c => c.controlId === t.controlId));
const processEffective = processTests.filter(t => t.conclusion === 'effective').length;
worksheet.push([
process,
count,
processTests.length,
processEffective,
processTests.length - processEffective,
processTests.length > 0 ? ((processEffective / processTests.length) * 100).toFixed(1) + '%' : 'N/A',
'', '', '', ''
]);
}
worksheet.push(['', '', '', '', '', '', '', '', '', '']);
// Risk Analysis
worksheet.push(['⚠️ RISK ANALYSIS', '', '', '', '', '', '', '', '', '']);
worksheet.push(['Risk Rating', 'Control Count', 'Tested', 'Effective', 'Test Priority', 'Status', '', '', '', '']);
for (const [risk, count] of Object.entries(assessment.controlsByRisk)) {
const riskControls = controls.filter(c => c.riskRating === risk);
const riskTests = tests.filter(t => riskControls.some(c => c.controlId === t.controlId));
const riskEffective = riskTests.filter(t => t.conclusion === 'effective').length;
const priority = risk === 'high' ? 'Critical' : risk === 'medium' ? 'Important' : 'Standard';
const status = risk === 'high' && riskTests.length / count < 0.9 ? '⚠️ Insufficient Testing' :
riskTests.length > 0 && riskEffective / riskTests.length >= 0.95 ? '✅ Effective' :
'⚠️ Requires Attention';
worksheet.push([
risk.toUpperCase(),
count,
riskTests.length,
riskEffective,
priority,
status,
'', '', '', ''
]);
}
worksheet.push(['', '', '', '', '', '', '', '', '', '']);
// Detailed Control Testing Results
worksheet.push(['🔍 DETAILED CONTROL TESTING RESULTS', '', '', '', '', '', '', '', '', '']);
worksheet.push(['Control ID', 'Control Name', 'Process', 'Risk', 'Test Date', 'Tester', 'Result', 'Deficiencies', '', '']);
for (const test of tests) {
const control = controls.find(c => c.controlId === test.controlId);
worksheet.push([
test.controlId,
control?.controlName || 'Unknown',
control?.process || 'Unknown',
control?.riskRating.toUpperCase() || 'Unknown',
test.testDate,
test.tester,
test.conclusion.replace('_', ' ').toUpperCase(),
test.deficiencies.length.toString(),
'', ''
]);
}
worksheet.push(['', '', '', '', '', '', '', '', '', '']);
// Deficiency Summary
worksheet.push(['❌ CONTROL DEFICIENCIES SUMMARY', '', '', '', '', '', '', '', '', '']);
worksheet.push(['Deficiency ID', 'Control ID', 'Severity', 'Description', 'Root Cause', 'Remediation Deadline', 'Status', '', '', '']);
const allDeficiencies = tests.flatMap(test =>
test.deficiencies.map(def => ({ ...def, testId: test.testId, controlId: test.controlId }))
);
for (const deficiency of allDeficiencies) {
worksheet.push([
deficiency.deficiencyId,
deficiency.controlId,
deficiency.severity.replace('_', ' ').toUpperCase(),
deficiency.description.substring(0, 50) + (deficiency.description.length > 50 ? '...' : ''),
deficiency.rootCause.substring(0, 40) + (deficiency.rootCause.length > 40 ? '...' : ''),
deficiency.remediationDeadline,
deficiency.status.toUpperCase(),
'', '', ''
]);
}
worksheet.push(['', '', '', '', '', '', '', '', '', '']);
// Management Representation
worksheet.push(['📝 MANAGEMENT ASSESSMENT & REPRESENTATIONS', '', '', '', '', '', '', '', '', '']);
worksheet.push(['Area', 'Management Assessment', 'Supporting Evidence', 'Conclusion', '', '', '', '', '', '']);
worksheet.push(['Control Environment',
'Management maintains effective control environment',
'Tone at top, organizational structure, HR policies',
'Adequate based on testing'
]);
worksheet.push(['Risk Assessment',
'Company identifies and assesses financial reporting risks',
'Risk identification process, fraud risk assessment',
'Processes in place and operating'
]);
worksheet.push(['Control Activities',
'Control activities are designed and operating effectively',
`${assessment.effectiveControls}/${assessment.testedControls} controls effective`,
assessment.overallAssessment === 'effective' ? 'Effective' : 'Needs improvement'
]);
worksheet.push(['Information & Communication',
'Relevant financial reporting information is communicated',
'Financial reporting systems, policies, procedures',
'Systems support effective reporting'
]);
worksheet.push(['Monitoring Activities',
'Management monitors internal control effectiveness',
'Ongoing monitoring, separate evaluations',
'Monitoring processes established'
]);
worksheet.push(['', '', '', '', '', '', '', '', '', '']);
// Recommendations & Action Plan
worksheet.push(['💡 RECOMMENDATIONS & ACTION PLAN', '', '', '', '', '', '', '', '', '']);
worksheet.push(['Priority', 'Recommendation', 'Responsible Party', 'Target Date', 'Status', '', '', '', '', '']);
let priority = 1;
for (const recommendation of assessment.recommendations) {
const priorityLevel = recommendation.includes('Immediate') || recommendation.includes('material weakness') ? 'HIGH' :
recommendation.includes('significant defic') ? 'MEDIUM' : 'LOW';
const targetDate = priorityLevel === 'HIGH' ?
new Date(Date.now() + 30 * 24 * 60 * 60 * 1000).toISOString().split('T')[0] :
new Date(Date.now() + 90 * 24 * 60 * 60 * 1000).toISOString().split('T')[0];
worksheet.push([
priorityLevel,
recommendation,
'Management/Internal Audit',
targetDate,
'OPEN',
'', '', '', '', ''
]);
priority++;
}
worksheet.push(['', '', '', '', '', '', '', '', '', '']);
// Regulatory Requirements
worksheet.push(['📋 REGULATORY COMPLIANCE CHECKLIST', '', '', '', '', '', '', '', '', '']);
worksheet.push(['SOX Requirement', 'Status', 'Evidence', 'Notes', '', '', '', '', '', '']);
worksheet.push(['Section 302 - CEO/CFO Certification',
assessment.deficiencySummary.materialWeaknesses === 0 ? '✅ Ready' : '❌ Not Ready',
'Management assessment completed',
assessment.deficiencySummary.materialWeaknesses === 0 ?
'No material weaknesses identified' :
`${assessment.deficiencySummary.materialWeaknesses} material weakness(es) must be remediated`
]);
worksheet.push(['Section 404(a) - Management Assessment',
'✅ Complete',
'Internal control assessment documented',
'Management assessment of ICFR effectiveness completed'
]);
worksheet.push(['Section 404(b) - Auditor Attestation',
assessment.overallAssessment === 'effective' ? '✅ Ready' : '⚠️ At Risk',
'Control testing and deficiency analysis',
'Auditor testing will validate management assessment'
]);
worksheet.push(['Disclosure Controls',
'✅ Assessed',
'Control testing results',
'Disclosure controls included in assessment scope'
]);
worksheet.push(['', '', '', '', '', '', '', '', '', '']);
// Professional Standards References
worksheet.push(['📚 PROFESSIONAL STANDARDS REFERENCES', '', '', '', '', '', '', '', '', '']);
worksheet.push(['- Sarbanes-Oxley Act of 2002, Sections 302 and 404', '', '', '', '', '', '', '', '', '']);
worksheet.push(['- SEC Rules 13a-15 and 15d-15 (Disclosure Controls)', '', '', '', '', '', '', '', '', '']);
worksheet.push(['- PCAOB AS 2201 - Audit of Internal Control', '', '', '', '', '', '', '', '', '']);
worksheet.push(['- COSO Internal Control - Integrated Framework', '', '', '', '', '', '', '', '', '', '']);
worksheet.push(['- SEC Guidance on Management Assessment of ICFR', '', '', '', '', '', '', '', '', '', '']);
worksheet.push(['- PCAOB Staff Questions and Answers on AS 2201', '', '', '', '', '', '', '', '', '', '']);
return worksheet;
}
}