Some Facts About Sarbanes Oxley Act Section 404.
Sarbanes Oxley Act is a federal law and it was signed into law on 3o July in 2002. Basically the 2002 act is called sox or Sarbox and is also called as public company accounting reform and investor protection. And this act was made to protect all the scandals in corporate sector and accounting sector. This act had 11 titles like auditors independence, corporate firm but there were many sections that were important like sec 302, sec 407 but the most important section was Sarbanes oxley act section 404.
This act has various titles also and they are:
Public Company Accounting Oversight Board Enhanced Financial Disclosures Studies and Reports Corporate Tax Returns
Sarbanes Oxley Act Section 404 has a controversial part is that it not only requires the management of the company but also requires to submit the all companys financial report to the external auditor. This is also the most expensive aspect in Sarbanes Oxley act section 404 because all the documentation and evaluation is done manually and it takes enormous and it takes enormous effort to do this. Sarbanes Oxley Act Section 404 also states that not only management auditor but external auditor is also responsible for the performance as well as assessment. Sarbanes Oxley Act section 404 also has issued the guidance on the same topic and it also stated that rather than improving on the cost, it is better to focus on the most risky areas for their improvement. Sarbanes Oxley Act section 404 also includes few requirements for the external auditor. To avoid the risk in areas of presentation, it is better to asses and improves the efficiency of all the areas that are being used. It is also very important to understand the process of transactions and all IT aspects as well so that it is easy to identify all the points that might arise in misstatement. It is also important to evaluate and control all the management areas to protect them from any false defect. It also states that it is important to rely on the companys management work based on various factors such as competency level among the individuals and keep a check on all risk factors. Sarbanes Oxley Act Section 404 also has an impact on small companies as major fixed cost is involved to complete the assessment. As there are many organizations who manage their data manually and even there are many organizations that also depend on Electronic Medium to manage the data. So it is very clear that IT plays important role in the internal control of any organization be it bigger or smaller. Sarbanes Oxley act 404 also states that all the main chief officers are responsible for the security, reliability of the systems and accuracy of the system. Sarbanes Oxley Act Section 404 also states about enterprise resource planning (ERP) system which incorporates authorizing, reporting and processing of financial data. Sarbanes Oxley act 404 also stated that corporate financial officer and chief information officer plays a very important role in the management of internal control of the organization.
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