Section 404 Of The Sarbanes Oxley Act (SOX)

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Corporate Compliance Report Over the past decade, the nation’s eyes have been opened to the scandalous world of business which has compromised the confidence of the public in the corporate world. This image has triggered a larger emphasis on internal control systems and audits. In section 404 of the Sarbanes Oxley Act, publically traded organizations are required to include a report about the effectiveness of controls in their annual form 10-k. These controls are the means an organization uses to ensure that business functions are performed in compliance of the law and procedures of the company. “Internal control is broadly defined as a process, effected by an entity's board of directors, management and other personnel, designed to provide…show more content…
The intention of SOX is to restore the confidence of the public and investors through the enhancement of corporate governance, improving the oversight of auditors, focusing the attention of companies and auditors on internal controls, and strengthening the penalties for noncompliance (Deloitte, 2004). Internal controls are essential for establishing corporate governance. In sections 302 and 404 of the Sarbanes Oxley Act, emphasis is placed on the importance of internal controls on corporate governance within an organization. In order to address internal control issues, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) issued control guidelines called the Internal Control-Integrated Framework. “COSO was formed in 1985 to sponsor the National Commission on Fraudulent Financial Reporting, an independent private-sector initiative which studied the causal factors that can lead to fraudulent financial reporting. It also developed recommendations for public companies and their independent auditors, for the SEC and other regulators, and for educational institutions,” (COSO,…show more content…
Without controls put into place, it becomes very difficult for an organization to determine if they are in violation and have potential for unwanted issues and exposure. With strategic planning and development, the possibility for working corporate governance is very achievable and will suffice the needs of the organization. Developing preventive, detective, and corrective controls are all essential aspects of the desired corporate governance. Although internal controls are an essential part of organization’s corporate governance in the aspect of monitoring and implementing procedures, it should remain a primary objective of the organization to focus on ethics. A code of ethics can provide an additional control for an organization. Ethics can be a deriving point of many issues. If ethics are not monitored, there can be imminent violations throughout the organization. Ethics are a binding point for decision making and can ensure, in many instances, that the organization remains compliant with regulations governing the

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