Section 404 of SOX
- 1. Acts Exploring Section 404 of the Sarbanes-Oxley Act of 2002
- 2. Title IV of SOX 2 • Comprised of 9 provisions, in which the primary focus is to improve financial disclosures • Section 401 - Requires companies to provide financial statements that adhere to GAAP • Section 402 - Prohibits issuers to protract the credit to any executives or directors of that issuer
- 3. Title IV of SOX 3 • Section 404 - Most controversial; Obliges issuers to include on their annual report an internal control report • Section 405 - Registered investment corporations need not to comply with policies under Sections 401, 402 or 404 • Section 407 - Obliges corporations to employ an independent financial expert who will be a part of the company’s auditing committee
- 4. Title IV of SOX 4 • Section 408 - Authorizes SEC to regularly and systematically review the reports made by the issuers • Section 409 - Requires issuers to report any information regarding material changes in the financial status or activities of the issuer
- 5. Scope of Section 404 5 • Business institutions are required to comply with the law • Policies under Section 404 do not apply to private subsidiaries of public companies • Obliges foreign issuers to adhere to the policies set by Section 404 • All entities that submit Forms 10-K or 10- Q need to comply with Section 404
- 6. Rules and Policies under Section 404 6 • Companies should conduct a formal evaluation of its controls and incorporate their assessment of the controls on Form 10-K. • External auditors should give their independent opinion regarding the efficacy of the system of the IFRS . • Management should follow the set guidelines in creating the internal control report.
- 7. Rules and Policies under Section 404 7 • The issuer is liable for the structure of its internal control. • Entities should follow the guidelines provided by COSO when establishing the internal controls. • Companies can utilize COBIT as an auxiliary to COSO when evaluating IT controls.
- 8. Good fortune is what happens when opportunity meets with planning. - Thomas Alva Edison 8 BKM Sowan Horan, LLP 15301 Dallas Parkway, Suite 960 Dallas, Texas 75001 Phone: 214-545-3965 Fax: 214-545-3966 www.bkmsh.com For more information about Section 404 of the Sarbanes-Oxley Act of 2002, please visit: http://bit.ly/BKMSH-Section-404-Sarbanes-Oxley-Act