Sarbanes-Oxley Section 404. June 29, 2005. Table of Contents. SOX 404 Background 3 SOX 404 Goals 4 SOX 404 Requirements 5 SOX 404 Assertions 6 SOX 404 Compliance 7 COSO – Internal Controls 8 COSO – Internal Controls Framework 9 Why Do You Really Care About SOX 404?10
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Sarbanes-Oxley Section 404
June 29, 2005
Table of Contents
Due to the scandals in corporate financial reporting, Congress enacted in 2002, the Sarbanes Oxley Act (“SOX”). The Security Exchange Commission oversees the compliance by publicly traded companies to the Act. The Public Companies Accounting Oversight Board (“PCAOB”) drives the compliance.
SOX Section 404 rules require each annual report to contain an internal control report which shall state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting, and contain an assessment of the effectiveness of the internal control structure and procedures of the issuer for financial reporting.
Filing due dates:
The goals of a SOX 404 program are to ensure that enterprise internal controls are of such quality that there will be:
SOX 404 Overview - Assertions
Note: Absence of sufficient evidence to support the Company’s assessment may constitute a significant deficiency that results in a report qualification by the external auditors.
COSO – Internal Controls
COSO - Internal Control Framework
The process to determine whether internal control is adequately designed, executed, effective and adaptive
The process which ensures that relevant information is identified and communicated in a timely manner
The policies and procedures that help ensure that actions identified to manage risk are executed and timely
The evaluation of internal and external factors that impact an organization’s performance
The control conscience of an organization. The “tone at the top”
Why Do You Really Care About SOX 404?
Steps to take to enhance your internal controls: