[IMGCAP(1)][IMGCAP(2)]Effective internal controls reasonably prevent material misstatements in financial reporting and fraud, but poor internal controls have hurt businesses, investors and the public accounting profession.
In response to the large-scale frauds and lack of internal controls at large, public companies such as Enron and WorldCom a decade ago, Congress passed the Sarbanes Oxley Act of 2002 to restore the faith of the investing public. Section 404 of SOX requires management to explicitly acknowledge responsibility for establishing, maintaining and assessing internal control effectiveness. Section 404 also required auditors and management to provide an opinion on the effectiveness of internal controls.
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