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Investors’ Perspective the Focus of Conference on New Section 404 Internal Control Reporting

Investors’ Perspective the Focus of Conference on New Section 404 Internal Control Reporting

by Rick Turoczy on January 12, 2005

Stanford Law School today convened a symposium of federal regulators, industry experts and leaders from the investment community and the auditing profession to address the new internal control reporting process required by the Sarbanes-Oxley Act, the resulting reports that investors will begin to see next month and what those reports mean for investors and other market participants.

“The world of Section 404 compliance and reporting is much more complicated than most people realize,” said Joseph Grundfest, W. A. Franke professor of law and business at Stanford Law School, as he opened the symposium. “We hope to demystify the world of 404 for investors so that they can appropriately interpret the flood of oncoming 404 opinions,” he added.

In his keynote address, Alan Beller, director of the SEC’s division of corporate finance, highlighted the responsibility of public companies and their auditors under Section 404 to provide complete and meaningful disclosure. He stressed the importance to investors of these new reports, telling the group, “… It is also incumbent on investors to demand from companies the disclosure which they need to evaluate particular material weaknesses and to review and analyze that disclosure with particular care … [in order to evaluate the implications of given material weaknesses for reliability of financial reporting and financial statements], and also to consider what remedial steps companies are taking. Any disclosure that a company has a material weakness is a serious matter for investors, but that disclosure should also be the starting point rather than ending point for investors’ analysis.”

Investors’ Perspective the Focus of Conference on New Section 404 Internal Control Reporting

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