SOX compliance
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Source : http://www.aicpa.org
Activity:
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last activity : 07 06 2010 20:18:04 +0000
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Sox Act comonly known as Serbanes and Oxley Act is a United States federal law enacted on July 30, 2002 in response to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom.
Althogh the Act has 11 Sections, but the section 404 is the most famous and talked one, The reason being its applications in providing sharp tools and governances for leading and developing companies. One more reason being the effort and amount costed in implementation.
Firstly I will take you through the reqquirements of its Implementation:
Act requires management of public companies to include in their annual reports an assessment of the effectiveness of their financial controls
Compliance requires management’s documentation of its internal controls over financial reporting
Requires an audit of internal controls by the external auditor in conjunction with their audit of the financial statements.
Section 404 has provided some valuable insights that the time, redeployment of people and other costs associated with the initial implementation is not sustainable. So the implementation of Section 404 is an approach towards transition from a “project” orientation to a sustainable “process.”
There is a formal standardized basis of implementation of section 404,
Organization Structure,most important of which I have listed for you
• Scope, Documentation, and Testing,
• IT Controls,
• Use of External Resources,
• Relationship with the Auditor,
• Deficiency Management,
• Audit Committee Communications,
• Section 302/404 Certification Process,
• Management Letter and Reporting
It is important to know that the rules surrounding Section 404 come from different sources depending on the perspective of the involved party and all those rules are governed for the purpose of control defeciency, significant defeciency and material weaknesses.
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