Sarbanes Oxley Act Section 404

Section 404 b of sarbanes oxley act of 2002.

Sarbanes oxley act section 404. Summary of section 404. Assessment of internal control further information. Sox 404 top down risk assessment the most contentious aspect of sox is section 404 which requires management and the external auditor to report on the adequacy of the company s internal control on financial reporting icfr.

This statement shall also assess the effectiveness of such internal controls and procedures. Section 404 is the most complicated most contested and most expensive to implement of all the sarbanes oxley act sections for compliance. The registered accounting firm shall in the same report attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting.

Issuers are required to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. The sarbanes oxley act requires that the management of public companies assess the effectiveness of the internal control of issuers for financial reporting. Sox section 404 sarbanes oxley act section 404 mandates that all publicly traded companies must establish internal controls and procedures for financial reporting and must document test and maintain those controls and procedures to ensure their effectiveness.

Since the law was enacted however both requirements have been postponed for smaller public companies. The requirement of an auditor s attestation won t apply to most smaller public companies until their 2008 annual reports. All annual financial reports must include an internal control report stating that management is responsible for an adequate internal control structure and an assessment by management of the effectiveness of the control structure.