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By Tom Struyk and Dan Bobos
Audit and Statistics Committee
The Sarbanes-Oxley Act of 2002 is the securities legislation with the largest impact since the Securities Act of 1933 and the Securities Exchange Act of 1934. The section of the act that focuses on internal controls over financial reporting is 404. This section has five requirements:
- Statement of management’s responsibility
- Statement identifying the framework used by management
- Management’s assessment of the effectiveness of the entity’s internal control over financial reporting and a statement as to whether the internal controls are effective
- Statement that the public accounting firm that performed the audit of the financial statements is included in the annual report
- Attestation report of the public accounting firm
While these requirements appear simple enough, do not be fooled. The results from the initial reporting period have shown that there are many questions and that implementation efforts have been substantial. At the NAIC spring meeting, implementation of the Sarbanes-Oxley Act of 2002 was delayed until 2007. This was a welcomed reprieve, but please keep in mind that 2007 isn’t such a long way off. It would be wise to begin developing a plan for implementing the Sarbanes-Oxley Act requirements now.
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