Know About the Key Benefits of SOX Section 404 Assessment

Posted by compciti on September 3rd, 2018

SOX Section 404 Compliance Assessment - an Expensive and Complicated Review of for Enterprises’ Financials

One of the main purposes of Sarbanes-Oxley Act (SOX) 2002 is to minimize accounting errors and frauds while reinstating general public confidence in the enterprises’ financial reporting. The dreadful series of financial irregularities including accounting mistakes and internal audit failure that made the US Congress to pass SOX legislation have badly shaken that confidence. SOX Section 404 assessment has become mandatory for public companies to re-establish public trust by strengthening the internal controls that emphasize the accuracy and consistency of their published financial details. It involves a thorough review of company’s financial statements every year by an expert auditor to prove the effectiveness of the internal control structure and procedures followed for financial reporting. Whenever a public company’s financial pass the standards of SOX section 404 compliance, it helps boost the public confidence in its financial reporting.

SOX Section 404 Assessment - a Must Take Responsibility to Maintain the Accuracy of Corporate Disclosures

Section 404 is a more crucial part of SOX legislation with an extensive set of requirements; starting from verification of financial records by both the CFO and CEO, and creating the more financially learned and responsible audit committees to becoming more independent of the external auditor, and implementing fraud risk management procedures. It is designed to quickly notify the concerned authorities of possible frauds or unlawful practices within the public registered company. Additionally, the legislation dumped the privately set auditing standards of the AICPA for a professional set auditing standards of the PCAOB. This provision can be seen as a step to meet the longstanding demand of maintaining accurate financial records and an effective management of internal accounting control by the public companies in the Securities Exchange Act of 1934.

SOX Section 404 noncompliance dramatically increases the risk of penalties for false or inaccurate financial reporting, leading to highly aggressive prosecution all the time. It should be remembered that the penalties for SOX Section 404 Assessment failure may include fines, ban from public stock exchanges and cancellation of D&O insurance policies. As per this act, CFOs and CEOs who knowingly submit a false certification to a SOX Section 404 compliance assessment can be fined as much as 5 million and jailed up to 20 years.

Key Benefits of SOX Section 404 Compliance Audit

SOX Section 404 introduced a wholesome new approach to internal structure control and financial reporting which infused greater public trust. In fact, Section 404 assessment has made more and more public companies to see the necessity for internal reforms; undeniably, many of them felt anxious by the flaws and gaps that compliance audit reports, such as lack of implementation of approved policies, needless complexity, blocked communications, and a poor compliance culture.

With SOX Section 404 assessment, the public companies will be able to regulate and strengthen key financial procedures; get rid of unnecessary information systems and combine various platforms; lower inconsistencies in data descriptions; computerize manual processes; decrease the number of data transfers; better combine far-off offices and assets; train new staff to speed up operation; expand responsibility for internal controls; and remove redundant controls.

To know how your business can comply withSOX Section 404 and realize all the above benefits, consider reaching out to a cyber security auditor and compliance expert.

This post is published by CompCiti, an expert cyber security and cyber management service provider in NYC helping businesses to avoid the risks and penalties with adequate SOX Section 404 assessment. To make your business pass the SOX Section 404 compliance requirements, contact the professional auditors of CompCiti at (212) 594-4374!