Question

Your boss is part of a team that will be interviewing candidates for the position of Chief Compliance Officer. You have been asked to prepare a brief summary for the interviewers to use as a refresher for what they already know about SOX in general and Section 404 specifically. Make sure your report includes the following information:

1.    A brief description of SOX.

2.    A brief description of internal control.

3.    A list of the major requirements of Section 404.

4.    Any other information you deem important.

5.    A brief summary or conclusion to your report.

6. Appendix: Which is the better article and why do you think so?

Answer 1

Solution:-

(1) A brief description of SOX

The Sarbanes oxley Act of 2002 introduced to eliminate or minimize corporate fraud. It created the Public Company Accounting Oversight Board (PCAP) to oversee the accounting industry. It is passed by the U.S. Congress to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise.

(2)A brief description of internal control

• Compliance with COSO or other frameworks
• Risk assessment
• Internal control design and implementation - entity level controls, activity level controls
• IT controls and risks - general controls, application controls
• Spreadsheet controls
• Internal control monitoring best practices

(3) A list of the major requirements of Section 404.

   Threats to Compliance:

  1. Lack of an enterprise-wide internal control management program

2. Lack of a formal enterprise risk management program

3. Inadequate controls associated with the recording of nonroutine, complex, and unusual transactions

4.Inability to evaluate and test controls over outsourced processes