Audit committees, boards of directors, and remediation of material weaknesses in internal control

• Main Author: GOH, Beng Wee
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2009
• Subjects: Sarbanes-Oxley Act (SOX); Accounting improprieties; Enron; Financial reporting; Accounting; Business Law, Public Responsibility, and Ethics; Corporate Finance
• Online Access: https://ink.library.smu.edu.sg/soa_research/127; https://ink.library.smu.edu.sg/context/soa_research/article/1126/viewcontent/acav_causality_icse24.pdf
• Institution: Singapore Management University

The Sarbanes-Oxley Act (SOX) was passed in 2002 in response to a series ofaccounting improprieties at well-known companies such as Enron and WorldCom.One important aspect of SOX is the internal control requirements. SOX section302 requires that management evaluate the effectiveness of disclosure and controlprocedures, report results of the evaluation, and indicate any “significant changes”in internal controls since the last 10-K or 10-Q report (Securities and ExchangeCommission [SEC] 2002). In addition, SOX section 404 requires that manage-ment’s assessment of the effectiveness of internal control over financial reportingand auditors’ attestation on management’s assessment be included in firms’ 10-Kreports (SEC 2003a). The heightened attention to internal control can enhance thereliability of financial statements by helping companies to identify internal controldeficiencies and remediate these deficiencies in a timely manner (Charles RiverAssociates 2005).