（2003）How Sarbanes-Oxley Will Change the Audit Process.pdfVIP

AUDITING/INTERNAL CONTROLS CPAs will have to develop new procedures and scrap some old ones. How Sarbanes-Oxley Will Change the Audit Process B Y D O N A L D K . M c C O N N E L L J R A N D G E O R G E Y . B A N K S ongress enacted the Sarbanes-Oxley Act of 2002 in response to a spate of highly publicized business failures, allega- /IIIIIM,,, , tions of corporate improprieties and finan- cial statement restatements. Section 404 of the act requires management to acknowl- edge its responsibilit) for establishing and maintaining adequate in- ternal controls, including asserting their effectiveness in writing. The financial statement auditor, in turn, must report on managements assertion about the effectiveness of its internal controls as of the companys yearend. These provisions apply to entities with market capitalization of more than $75 million for fiscal years ending on or after June 15, 2004. (Smaller companies must comply as of the first fiscal year ending on or after June 15, 2005.) (continued on page 50) Long-Term Cost Implications Among the nations fastest growing public companies, 81%