Prepare a paper on the implementation of Section 404 of the Sarbanes-Oxley Act in 2002. Discuss how accountants within an organization are involved in helping their organizations comply with this section. Describe also how accountants in public accounting and consulting are affected by this section of SOX. 1,000 - 1,500 words.
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Section 404 of the Sarbanes-Oxley Act of 2002 requires companies to publish information in their annual reports concerning the scope and adequacy of the internal control structures and procedures for financial reporting. There should be comments on the effectiveness of internal controls and procedures. Public accountants are required to attest to and report on the effectiveness of the internal control structure and procedures for financial reporting (a). The public accountant must report on the management's assessment of its internal control.
The accountants within a firm are actively involved in the implementation of Section 404 of the Sarbanes-Oxley Act. The implementation begins with the formation of the sponsoring committee, the implementation team, and the development of the formal written plan. Accountants in the company are actively involved in the implementation team. The implementation team includes the chief accounting officer, accounting department representatives, and members of internal audit department. If there is a separate treasurer department, members of that department are also included in the Section 404 of the Sarbanes-Oxley Act implementation team. Accountants in the organization help document the financial cycles. This documentation shows the internal control objectives and points out deficiencies. The internal accountants test transactions for verifying if the existing internal controls are performing as they were designed to do (b). After testing, the internal accountants assist in documenting the procedures used and the results obtained about the operating effectiveness of controls. If deficiencies are found in the process, internal accountants document these deficiencies and document the plans created to address these deficiencies. Finally, the internal accountants play an important role in preparing the report that establishes management's responsibilities to set up and maintain adequate internal controls over financial reporting. Even though the report is required to be signed by the management, ...
This solution explains issues related to implementation of Sec 404 of SOX 2001. The sources used are also included in the solution.