How to streamline SOX controls for Debt Covenant Compliance

Learn how to streamline SOX controls for debt covenant compliance using the DataSnipper platform. This step-by-step guide focuses on three key attributes: Other Debts, Financial Information Certification, and Profitability.

Video tutorial

Start procedure

To perform a Debt Covenant Compliance test:

For attribute 1 - Other Debts:

1. Start by using the Text Snip to extract the relevant covenant details from your imported bank agreement.
   
2.  Hold the "Control" key to snip multiple covenant details directly into the same Excel cell.
3. Navigate to the debt schedule document.
4. Use the Sum Snip to calculate the total of all outstanding debt, ensuring it does not exceed the maximum principal amount stipulated in the agreement.
5. Should there be a discrepancy, use the Exception Snip to flag this non-compliance.

For attribute 2 - Financial Information Certification:

1. Use the Text Snip with the "Control" key to extract the covenant details into your workbook for easy reference.
2. Next, use Text Snip to capture the name of the CPA firm that audited the financial statements.
   
3. Use Text Snip to capture evidence of the approval, including the appropriate sign-off.
4. Use a Validation Snip to confirm that the compliance requirements for this attribute are met.

For attribute 3 - Profitability:

1. Use Text Snip to extract the relevant covenant language from the debt agreement.
2. Snip the pretax income figures for the required years (e.g., 2020 and 2019) from your annual report.
3. Finally, use the Validation Snip to confirm compliance with the profitability targets outlined in your agreement.
   
   

Conclusion

This is how DataSnipper can help you significantly streamline SOX controls for debt covenant compliance. As you can see, DataSnipper not only simplifies the process of managing debt covenant compliance but also ensures accuracy and efficiency, reducing the risk of financial repercussions and enhancing operational oversight.