Sarbanes-Oxley Section 404

Sarbanes –Oxley Act, enacted by the United States congress is aimed at protecting investors. The protection is provided by improving the accuracy and reliability of corporate disclosures.

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

The Sarbanes-Oxley Act of 2002 (SOX) was passed by Congress and signed into law by President Bush to “mandate a number of reforms to enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud” and applies to all public companies in the U.S., large and small (The Laws That Govern the Securities Industry, 2015). The main purpose of Sarbanes-Oxley is to “eliminate false disclosures” and “prevent undisclosed conflicts of interest between corporations and their analysts, auditors, and attorneys and between corporate directors, officers, and shareholders” (Neghina & Riger, 2009). As a whole, the Sarbanes-Oxley Act is very complex and affected organizations must do their due diligence to ensure they

Under SOX Section 404, all publicly listed corporations are required to maintain an adequate system of internal control. Under SOX, corporate executives and the board of directors are personally responsible for making sure that the internal controls in place are effective and reliable. Independent auditors should also attest to the reliability of the said internal controls. Failure to do so would result to fines and/or imprisonment1.

I am not familiar with the law nor do I know if it is currently being used in my organization. Based on my research, Section 404 of the Sarbanes-Oxley Act requires public companies' annual reports to include the company's own assessment of internal control over financial reporting, and an auditor's attestation. Since the law was enacted, however, both requirements have been postponed for smaller public companies. Under the Sarbanes-Oxley Section 404, all public organizations are mandated to publish information in their annual reports in regards to the scope and adequacy of the internal control structure and procedures of their financial reporting. This information is then used to assess the efficiency in the internal control and procedures

The Sarbanes-Oxley Act has many provisions. A few of the major provisions include the creation of the Public Company Oversight Board (PCAOB), Section 201, 203, 204, 302, 404, 809, 902, and 906. The PCAOB was the first true oversight of the accounting industry. It oversees and creates regulations, and it will monitor and investigate audits and auditors of public companies. The PCAOB has the authority to sanction firms and individuals for violations of laws, regulations, and rules. Section 302 requires the CEO and CFO to certify that they reviewed the financial statements, and that they are presented fairly. Section 404 requires management to state whether internal control procedures are adequate and effective, and requires an auditor to attest to the accuracy of the statement. Section 902 states that “It is a crime for any person to corruptly alter, destroy, mutilate, or conceal any document with the intent to impair the object’s integrity or availability for use in an official

The purpose of the Sarbanes-Oxley Act is to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities law, and for other purposes. (Lander, 2004) The Act created new standards for public companies and accounting firms to abide by. After multiple business failures due to fraudulent activities and embezzlement at companies such as Enron Sarbanes and Oxley recognized a need for the revamping of our financial systems laws, rules and regulations. Thus, the Sarbanes-Oxley Act was born.

Section 404, places great emphasis on internal controls and it is apparent that in the last couple of years this sections total costs have been going down severely. However, it is still high enough to maintain that it deters smaller companies from having enough money left over to be more innovative (Prince, 2005). As it was stated above the investors were the people who were supposed to benefit the most, but instead due to these high rules and compliances, companies have to follow, it is the auditors who gain the most. There are two ways to solve this problem; the first method is to not have a one-size-fits-all approach when it comes to the different sizes in company, and subsequently auditors understanding and focusing more on lower risk accounts and moving to the Higher risk accounts (Basilo

It affects the businesses by making the corporate officers can interact with the auditors. The act gives more independence to outside auditors as well. With the new act every business should know that every financial statement they produce should be valid and able to be backed up. Businesses can no longer get off the hook for simply not knowing that they were

After major corporate and accounting scandals like those that affected Tyco, Worldcom and Enron the Federal government passed a law known as the Sarbanes-Oxley Act of 2002 also known as the Public Company Accounting Reform and Investor Protection Act. This law was passed in hopes of thwarting illegal and misleading acts by financial reporters and putting a stop to the decline of public trust in accounting and reporting practices. Two important topics covered in Sarbanes-Oxley are auditor independence and the reporting and assessment of internal controls under section 404.

To protect investors from the possibility of fraudulent accounting activities by corporations, the Sarbanes-Oxley Act of 2002 (SOX) was passed by U.S. Congress in 2002. Under SOX, TITLE II—AUDITOR INDEPENDENCE as a independence standard to guide external auditors.

The Sarbanes-Oxley Act (SOX) was enacted in July 30, 2002, by Congress to protect shareholders and the general public from fraudulent corporate practices and accounting errors and to maintain auditor independence.   In protecting the shareholders and the general public the SOX Act is intended to improve the transparency of the financial reporting.   Financial reports are to be certified by the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) creating increased responsibility and independence with auditing by independent audit firms. In discussing the SOX Act, we will focus on how this act affects the CEOs; CFOs; outside independent audit firms; the advantages and a

These changes were outlined in the Sarbanes Oxley Act of 2002 (SOX). SOX completely revolutionized financial reporting, requiring senior management of firms to sign off on each financial statement that the company issues. It also stipulated that wrongful doing can result in not only termination but also imprisonment. SOX amplified the requirement for companies, requiring firms to maintain proper levels of internal controls when it comes to operating activities. SOX also established the creation of the Public Company Accounting Oversight Board (PCAOB) which implemented stricter auditing standards for public accounting firms. Not only were accounting firms required to consider internal controls, but they were also required report any significant deficiency directly to the board of directors. SOX stressed the importance of internal controls, and within internal controls it established the need for segregation of duties. Since this time, there have been many additions to accounting policies regards segregations of duties, and many functions of the business process dedicated to it.

Sarbanes Oxley (also known as SOX) is legislation passed by the United States Congress in 2002, in the wake of a number of major corporate accounting scandals. Enron, WorldCom, Tyco, and others cost investors billions when their stock prices collapsed. As a result of SOX, top management must separately certify the accuracy of financial Furthermore, consequences for fraudulent financial activity are much more severe. Also, SOX intensified the management role of boards of directors and the independence of the external auditors who review the accuracy of corporate financial statements. The primary changes caused the formation of the Public Company Accounting Oversight Board, the assessment of personal liability to auditors, executives and board members and creation of the Section 404, which recognized internal control events that had not existed before the legislation.

Section 404 requires public companies to establish internal controls and report annually on their effectiveness over financial reporting. The CFO and CEO are held personally responsible for the internal controls via the requirement to sign a statement certifying the adequacy of the internal control system (Moffett and Grant, 2011, p. 3). Additionally, the company’s independent auditor must issue an attestation regarding management’s assessment of the internal structure as part of the company’s annual report (Bloch, 2003, p. 68).