Management’s Report on Internal Control Over Financial Reporting: SEC Issues Final Rules

Article by Todd Eckland and Stanton Wong

On June 5, 2003, the Securities and Exchange Commission (SEC) adopted final rules implementing Section 404 of the Sarbanes-Oxley Act of 2002 (Act). The rules impose several new requirements on public companies regarding evaluation and disclosure of internal controls over financial reporting:

• Management will annually assess the effectiveness of the company’s internal control over financial reporting;
• Management will include a report on the effectiveness of the company’s internal control over financial reporting in the company’s annual report filed with the SEC;
• The company will engage its outside auditors to attest to management’s assessment of the company’s internal control over financial reporting;