Internal Controls of Act 404 Oxley sarbanes

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Section 404 act oxley sarbanes sectionis the Management Assessment of Internal Controls and it requires companies to;

Provide in each annual report an internal control report assessing the effectiveness of their internal control structure and procedures. Obtain an attestation of and report on the management assessment by the public accounting firm that prepares the audit report. Provide reasonable assurance of asset protection from unauthorized acquisition, use of disposition that would have material effect on financial statements.

Section 404 is effectively a case ofchecks and balances.

The CEO and the CFO are required to certify the presence and effectiveness of adequate internal business controls

The external auditor must also attest to the validity of the management claims.

Due to the prosecution nature of various attorneys general, it is likely no audit firm will take this function without due care and diligence.

Adequate internal controls must be in place and enforced.

Sarbanes Oxley include a review of a companys controls within their ERP systems, including analysis of segregation of duties violations and access to sensitive transactions.

To satisfy the requirements of Section 404, companies will almost certainly require a detailed audit.

The high level of effort required to satisfy Section 404 has led many compliance managers tonot focus as much as they should on the requirements of Section 409.

Sarbanes Oxley regulators have provided much guidance to corporate management and auditors on IT governance and security to comply with Section 404.

The SOX area that is emerging as the most problematic is the issue of deciding whether a company has reportable control deficiencies under section 302 and 404 of the Act.

Firms find shortage of CPAs and some Silicon Valley companies are finding it tough to get a Big 4 accounting firm to audit their books, as they are extremely busy.

In summary, 404 Internal Controls are a series of checks and balances to help companies detect and prevent fraud and mistakes in financial statements as well as limit employee access to sensitive financial data.

With 404 compliance, companies are under pressure to define and document internal controls of financial systems and processes.

The SEC did extended the deadline by five months for complying with Sarbanes Oxley Section 404, related to internal controls. Public companies oftne turn to CPA firms for the Section 404 internal control work created by the legislation.