Implementing Sarbanes-Oxley
Technical Session Touches on Section 404

By Kim Patterson

Section 404 is tough by any standard. The internal controls requirement of the Sarbanes-Oxley Act, according to a speaker at a recent New York State Society of CPAs’ evening technical session, has been the hardest for public companies to execute.

“Section 404 of Sarbanes-Oxley uses the least words but requires the most work,” said Joel Quall, of MarketAxess Holdings Inc.

Attendees agreed, stating that the work involved has been time-consuming and demanding, a reflection of a wider sentiment that partially prompted the Securities and Exchange Commission to extend its deadline for implementing internal controls to Nov. 15 for accelerated filers. Nonaccelerated filers have until July 15, 2005, to comply.

Quall joined fellow speaker David Rubenstein, of Weiser LLP (both members of the Society’s CFO Committee, which sponsored the Sept. 20 evening technical section on implementing Sarbanes-Oxley), in outlining the act’s requirements before an audience of 60 NYSSCPA members.

The presenters discussed how Sarbanes-Oxley requires companies to implement extensive corporate governance policies to prevent and timely respond to fraudulent activity within a company. For example, companies must create means for employees to anonymously report fraud.

The duo also reviewed the specifics of Section 404, which require executives to certify that their financial statements are accurate and instructs public companies to implement internal controls procedures to improve corporate reporting, oversee internal auditors and hold management accountable.

The two-hour session could not cover all aspects of Sarbanes-Oxley, but participants generally were pleased with the discussion and material.

Rubenstein’s work involves assisting companies through the implementation process, and Quall recently wrote an article on Section 404 implementation for the August issue of The CPA Journal. (Go to www.nysscpa.org/cpaj.htm and click on 2004 to find the July issue.)

The CFO Committee frequently hosts programs of interest to members in industry. The next session, “Human Resources Update for Financial Executives,” will be held on Nov. 20.

If you would like more information on the CFO Committee, go to www.nysscpa.org, click on “Find Committees” in the left-hand column, and select the link to the CFO Committee.