Sarbanes-Oxley SOX 404 – What would cause internal controls to be ineffective?

  • Controls are ineffective if one material weakness is identified by management and/or by Accounting Company as of the end of the fiscal year
  • Controls may be ineffective if a number of significant control deficiencies exist which in aggregate could lead to a material misstatement of financial statements
  • Examples of items potentially leading to a material weakness:
    • Inadequate documentation to support management’s assessment
    • Inadequate internal controls over financial reporting
  • The decision on what items are a material weaknesses will be determined by Company’s Disclosure Committee; Management; Accounting Firm; and the Audit Committee

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