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Sarbanes-Oxley Section 404 and 409: Striking Corporate America with Fear of Fines and Jail Time
The new attestation regulations under the Sarbanes-Oxley Act are striking corporate America with fear of fines and jail time. The ramifications of noncompliance are real. Under Sarbanes-Oxley, penalties for noncompliance are up to $5 million in fines or 20 years in prison.
With deadlines looming ominously, it is important that companies know what is required to satisfy each of the sections of the Sarbanes-Oxley Act and are actively working towards compliance.
“More than 15,000 publicly traded firms in the United States are regulated under the Sarbanes-Oxley Act. As of today, none are ready— and most don’t even realize how unprepared they are— to comply”
- Adrian Bowles
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Sarbanes-Oxley
As of June 15, of this year, most publicly traded companies in the United States, must be ready to meet a new stringent set of attestation regulations under the Sarbanes-Oxley Act. Sarbanes-Oxley is aimed at improving the transparency and accuracy of financial accounting and record keeping, in an attempt to prevent scandals, such as Enron, from shaking the corporate world again.
Section 404
Section 404 of Sarbanes-Oxley stipulates that managers and directors sign of on all receipts and payouts, and that they maintain adequate systems to prevent and detect unauthorized material transactions. Section 404 also requires that a company’s independent auditors attest to and report on management’s controls assessment, following standards established by Public Companies Accounting Oversight Board. According to Section 404, internal controls must insure accurate record maintenance, as well as financial reporting that complies with generally accepted accounting principles.
[Section 404] is a small section, but it’s creating a large amount of work.” James J. Groberg
Section 409 Section 409, along with 404, controls the company’s ability to report on actual business processes and the company’s ability to assess the rules and policies designed to execute these processes. Section 409 mandates that companies disclose information that portends a material change in financial or operating conditions on a rapid and current basis.
Implications of Sarbanes-0xley While many companies are taking steps towards compliance with the act, few realize just how significant its ramifications will be. According to the specific wording of Sarbanes-0xley and the advice of one analyst, if information is available in a system, but nobody reads it, the CEO is still guilty. Compliance with Sarbanes-Oxley is more than just a financial issue, it is a systems and security issue, as well.
Conclusion The key for companies in dealing with Sarbanes-Oxley stipulations is to find a way to be compliant without inhibiting workflow.
Sarbanes-Oxley
Section 404
Section 409
Implications of Sarbanes-Oxley
Click here for specific information about how Cornerstone can help your industry and company be in compliance with Section 404 and 409 of the Sarbanes-Oxley Act.
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