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Sarbox 404 Goes into Effect Tomorrow

Sarbox 404 Goes into Effect Tomorrow

by Rick Turoczy on November 14, 2004

Although many companies are reportedly not ready for it, the era of internal-controls compliance begins in earnest tomorrow. That’s when Section 404 of the Sarbanes-Oxley Act goes into effect for all companies whose fiscal year ends after today.

There will be nothing to file on Tuesday. But by early next year, the vast majority of companies that report on a calendar-year will have to assess the effectiveness of their internal controls over financial reporting and state in their annual reports whether the controls are operating effectively. The companies’ outside auditors also must evaluate the in-house assessment and render an independent report on it.

Even though the Securities and Exchange Commission delayed the provision’s implementation date twice, a large number of companies are apparently not ready for prime-time compliance with 404. Last week, PricewaterhouseCoopers chairman Dennis Nally told a packed house of largely board audit committee members in New York City that the vast majority of public companies are nowhere near ready to meet the new law’s deadlines, according to BusinessWeek. “There’s a lot of risk out there,” Nally reportedly said.

Sarbox 404 Goes into Effect Tomorrow

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