Chapter 11

Internal Control Evaluation

Harry Cendrowski

Louis W. Petro

Introduction

The U.S. Companies Accounting Reform and Investor Protection Act of 2002, commonly referred to as the Sarbanes-Oxley Act of 2002 (SOX), requires that both the chief executive officer and chief financial officer of a publicly held company (Securities and Exchange Commission [SEC] registrant) certify the effectiveness of the company's internal control system. They are to certify

img Their responsibility for establishing, maintaining, and evaluating financial reporting controls and procedures.

img That a process exists to assure that all significant internal control deficiencies, material internal control weaknesses, or significant changes in internal controls and the procedures for financial reporting have been disclosed to the company's audit committee.

Companies must establish financial reporting controls and procedures to gather, analyze, and report events, uncertainties, conditions, and contingencies that could materially affect the operating results of the enterprise in order to provide the shareholders with an internal view of the company.

Section 404 of SOX (SOX 404) requires that the management of a publicly held corporation include a report on the corporation's internal control system in their annual ...

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