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Financial Accounting

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The Impact of the Sarbanes–Oxley Act of 2002 on Internal Controls

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Section 404 of the Sarbanes–Oxley Act of 2002 established new rules relating to the internal control systems of publicly traded companies. This means companies who trade their shares on the NY Stock Exchange and their auditors are subject to a number of new responsibilities.

Which of the following statements related to those responsibilities is TRUE?

Select ALL that apply.

A

Management is required to develop and maintain a system of internal controls that achieves a transaction error rate of less than .01%.

B

Management must establish and maintain a system of internal controls over its financial reporting function.

C

Auditors must assert within the annual report that the system of internal controls for the company is in place and functioning properly.

D

Auditors must assert within the annual report that the system of internal controls is the sole responsibility of company management, and not that of the auditor.

E

The auditor's assessment of the company's internal control system is a separate paragraph within standard audit report that assesses whether or not the company's financial statements are in compliance with GAAP, in all material respects.

F

External auditors do not need to assess or report on the internal control system of a company if the company's own internal auditors have already assessed the system and have found no irregularities.