Section 404 of the Sarbanes-Oxley Act of 2002 requires the management of all public companies to evaluate the effectiveness of their company’s internal control over financial reporting, and then have their company’s independent auditors test and report on such internal control.
Companies are required to comprehensively document processes and controls, decide which controls to test and then test those controls, and report on internal control over financial reporting.
Meeting Section 404 requirements is difficult and time consuming, and could be expensive if not planned and executed efficiently and properly.
LGC&D provides the following services to assist companies with complying with Section 404:
- Identify significant accounts and locations -- using financial statements and risk and materiality assessments (a top-down approach), we focus on accounts for which processes and controls are required to be documented and tested, and which locations are required to be included for multi-location entities.
- Document the existing design of internal control -- working with people throughout the company, we document relevant existing processes and controls.
- Evaluate internal control design -- using the company’s existing documentation, or the documentation created by working with people throughout the company, we map controls to financial statement accounts and control objectives and communicate any required remedial action.
- Identify controls required to be tested -- identify controls that are key to financial reporting to focus testing.
- Design internal control tests -- design comprehensive written testing programs that consider, among other things, the type of control, the frequency of its application, and the importance of the control.
- Test controls and communicate results -- test controls, document tests performed and their results, identify areas requiring remedial action and re-testing, and communicate results to assist management in evaluating the effectiveness of the company’s internal control over financial reporting.
- Act as project manager - coordinate our efforts with the company’s external auditors, assign experienced professionals to meet the company’s needs, and work in concert with the company’s internal resources.
For more information about LGC&D’s SOX 404 Services, e-mail Stephen Geremia at sgeremia@lgcd.com or call Steve at (401) 421-4800.
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