Accountancy Forum

INTERNAL CONTROL REPORTING REQUIREMENTS

ľ Section 404 of Sarbanes Oxley Act 2002 requires from management to file an internal control report with the annual report of the company to the SEC (USA.)


ľ This section is equally applicable to all foreign private issuer of US Company.

ľ The term 'foreign private issuer' means any foreign issuer meeting the following condition
ľ More than 50 percent of the company's outstanding voting securities are directly or indirectly held by residents of the United States;
ƒæ As per SEC (USA) rule RIN 3235 ¡V AI66 August 14, 2003 the companies should adopt COSO Internal Control ¡V Integrated Framework in order to be compliant with SOX 404;



WHAT IS COSO INTERNAL CONTROL- INTEGRATED FRAMEWORK?

COSO stands for ¡§Committee of Sponsoring Organization¡¨ is voluntary private sector organization dedicated to improving the quality of financial reporting through business ethics, effective internal controls and corporate governance.

COSO Internal Control ¡V Integrated Framework defines internal control as a ¡§Process¡¨ to achieve the following objectives

„« Effectiveness and efficiency of operations.
„« Reliability of financial reporting
„« Compliance with applicable laws and regulations
The COSO framework views internal controls as consisting of the following five interrelated components
A). Risk Assessment;
B). Control Environment;
C). Control Activities;
D). Information and Communication;
E). Monitoring;