During the audit of the financial statements we will be assessing the internal controls in use as mandated by the Sarbanes-Oxley Act of 2002. The act was designed to enhance corporate responsibility as it relates to financial reporting issues. Section 404 covers the internal controls that have been setup by the company. Internal controls are designed to protect the assets of a business from misuse or loss. Internal controls also help the business to streamline processes so that goals can be achieved at the best rate of return from the use of available assets. The remainder of this letter contains an overview of section 404 and other regulations relating to the audit of internal controls and a synopsis of internal control risks that have been identified within Apollo Shoes Inc. We will also describe the relationship between internal controls and the audit process as well as outlining our responsibilities in detecting and reporting fraud.
Section 404 of the act requires all publicly traded companies establish internal controls and procedures for financial reporting. The system of controls must be documented, tested, and maintained to ensure their effectiveness. To comply with section 404 Apollo Shoes Inc. has to submit an annual report that details the four following key elements;
Statement of responsibility issued by Apollo’s chief executive officer and the chief financial officer for establishing and maintaining adequate internal control structure and procedures
According to the Sarbanes-Oxley Section 404 Act, it is the responsibility of the management to establish and maintain internal controls required for financial reporting. The company’s latest year assessment of
Anderson, Olds, and Watershed rely on Apollo Shoes management for the financial statements. In addition, Apollo Shoes management is responsible for internal control over financial reports, ensuring the company complies with applicable laws and regulations, providing all financial records and other related financial information to the firm, and providing a representation letter at the conclusion of the audit confirming management’s
Internal controls represent an organization’s processes and procedures used to meet its goals and objectives and serve as a defense in safeguarding assets and preventing and detecting errors, fraud, and abuse. Effective internal controls provide reasonable assurance that an organization’s objectives are achieved through (1) reliable financial reporting, (2) compliance with laws and regulations, and (3) effective and efficient operations. The passing of the Sarbanes-Oxley Act of 2002, as well as the numerous corporate frauds and bankruptcies over the past decade—including some
I will coordinate and supervise a team of staff auditors. The staff auditors gather and test the evidence supporting the information in the audit. The audit manager, Darlene Wardlaw, reviews all audit work, prior to the review by a firm partner, Arnold Anderson. Mr. Anderson has the ultimate responsibility in ensuring an adequate review. A written report will complete the audit or review with AOW’s opinion of the audited information. It will show if the audited information is in accordance with accounting standards and also provides third parties with an adequate representation of Apollo Shoes, Inc.’s financial situation.
The section 302 in Title III - “Corporate Responsibility for Financial Reports”, would have made the CEO and CFO, which are Monus and Finn, respectively, state their understanding on how fair the financial statements presents the condition and result of operations in all material aspects. In part 5, this section also requires disclosure of significant deficiencies identified in internal control to the auditors and audit committee, among other disclosures related to fraud.
I take your concerns with the doubling of the audit fees very seriously, therefore, it is my responsibility to explain to you the justification for the fee increase. You are probably aware of the fact that Sarbanes-Oxley Act and PCBO Auditing Standard No.5 introduced changes in the requirements for the issue of financial statements for public companies. In fact, under Section 302 of the Sarbanes-Oxley Act management of the company is required to assess its company’s internal control and present the report on internal control over the financial reporting. In the case where there is a material weaknesses in internal control, management needs to inform the public about it. Also, Section 302 stipulates that a company’s CEO and CFO will have to certify its company’s financial statements which means that there will be personal legal consequences if they present misleading financial statements. In addition, changes were made regarding the auditing process of internal controls of the company. These changes include the integration of the audit of internal controls with the audit of financial statements. In accordance to PCABO Auditing Standard No. 5, our team will have to conduct a multi-step audit process where we’ll have to plan the engagement, use a top-down approach, perform testing of controls, evaluate identified deficiencies, if there are any, in order to identify material weakness in internal control, and issue an opinion regarding the effectiveness of the internal control. Furthermore, to satisfy our adherence to new requirements we’ll have to produce
LJB Company inquired about new internal control regulations required if they choose to go public. This report will discuss the regulations
Under the Sarbanes-Oxley Act of 2002, reports on internal control are required. Did the company’s management acknowledge its responsibility for establishing and
The general area to be studied in this journal article is Section 404 of the SOX. The article looks to understand the consequences associated with companies who fail to report on internal controls or material weaknesses. Understanding the consequences involved is significant since it falls on managers and auditor’s incentives to be able to find and report internal control weaknesses. In addition, it is important to understand why some companies list internal control weaknesses, when in fact they are material weaknesses within these controls. The purpose of this study is determine the consequences associated with failure to reporting internal controls under Section 404.
One of the major requirements that emerged from the Act is section 404. Section 404 requires each annual report of an issuer to contain an "internal control report," which shows the following:
Finally, Title IV section 404 requires management to include an internal controls assessment in its annual report to the SEC. The purpose of this legislative action now requires management to be responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting; provide an assessment of the effectiveness of the company’s internal controls. (Williams, 2011)
Auditors have the responsibilities as well as management to report internal controls. The auditors must examine closely management’s claim of effectiveness and also physically test the controls. After the examination, the auditors should express their opinion and any recommendations to fix any internal control weaknesses.
The final responsibility for the integrity of an SEC registrant’s internal controls lies on the management team. U.S. companies need to refer to a comprehensive framework of internal control when assessing the quality of financial reporting to determine that financial statements are being presented under General Accepted Accounting Principles, GAAP. The widely used framework is referred as COSO, Committee of Sponsoring Organizations of the Treadway Commission, sponsored by the following organizations American Accounting Association, the American Institute of CPA’s, Financial Executives International, the Institute of Internal Auditors, and the Institute of Management Accountants. COSO’s defines internal control as:
When engaged in auditing a public firm, such as Apollo Shoe Inc., an auditor must determine when to trust in the company’s internal controls and when to ascertain auxiliary testing methods are obligatory to analyze control risks. The sales and collection cycle is rather a substantial fraction of the audit because this unique segment employs a multitude of documentation and records ranging anywhere from customer and sales orders, shipping documents, credit memos, and general journal entries; therefore, a working
This report will describe the relationship between internal control practice and corporate governance, also the interaction of Corporate governance and internal control practice and its causes that can be improving the development of the company. Also evaluate the company which is WOODSIDE PETROLEUM LTD, to evaluate this company’s corporate governance statement communicates information about its governance and internal control practices. However, it also will examine two principles from ASX Corporate Governance, to weigh the pros and cons of the company.