Using Wikipedia (www.wikipedia.com), look up the entry for Sarbanes-Oxley Act. Look over the table of contents and find the section that describes Section 404.
What does Section 404 require of management’s internal control report?
Answer:
Section 404 requires management’s internal control report to:
(1) state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and
(2) contain an assessment, as of the end of the issuer’s fiscal year, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting.
The complete AICPA summary of Section 404 of Sarbanes-Oxley is as follows:
Section 404: Management Assessment of Internal Controls.
Requires each annual report of an issuer to contain an “internal control report,” which shall:
(1) state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and
(2) contain an assessment, as of the end of the issuer’s fiscal year, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting.
Each issuer’s auditor shall attest to, and report on, the assessment made by the management of the issuer. An attestation made under this section shall be in accordance with standards for attestation engagements issued or adopted by the Board. An attestation engagement shall not be the subject of a separate engagement.
The language in the report of the Committee that accompanies the bill to explain the legislative intent states, “. . . the Committee does not intend that the auditor’s evaluation be the subject of a separate engagement or the basis for increased charges or fees.”
Directs the SEC to require each issuer to disclose whether it has adopted a code of ethics for its senior financial officers and the contents of that code.
Directs the SEC to revise its regulations concerning prompt disclosure on Form 8-K to require immediate disclosure “of any change in, or waiver of,” an issuer’s code of ethics.