Why
was 404 introduced?
The overall aim of course,
is to restore public confidence after the Enron and Worldcom scandals.
The Sarbanes-Oxley Act has
created new requirements for public companies within the United
States of America and their global subsidiaries, which includes:
| - |
To create tight internal
controls over their financial reporting process and then to
regularly assess their effectiveness. |
| - |
Management to certify that they are responsible for establishing
and maintaining adequate internal control over financial reporting
for the company. |
| - |
Management to assess the effectiveness
of internal controls as of the company's most recent fiscal
year. |
| - |
Management to identify the tools used
to evaluate the effectives of internal controls of financial
reporting. |
| - |
Management to make a statement that
the company's independent auditors have issued an attestation
report on managements assessment of the company's internal
controls over financial reporting. |
Traditionally, a great
deal of this work would have been carried out by those company's
audit firms. However, they are now unable to deal with compliance
work relating to Section 404. Neither can they prepare accounting
schedules that are required during audit work, including such matters
as cash reconciliations into company account reconciliations or
depreciation schedules.
The question of independence
may also go as far as comparing work related to taxation.
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