Accounting Policy & Practice Series
Internal Controls: Sarbanes-Oxley Act §404 and Beyond
Portfolio Description
BNA Tax and Accounting Portfolio 5402, Internal Controls: Sarbanes-Oxley Act §404 and Beyond, emphasizes a broad understanding of internal controls as a set of internal procedures of an enterprise providing reasonable assurances that an enterprise will meet its goals in all areas - rather than focusing solely on those procedures aimed at historical financial reporting.
While the Sarbanes-Oxley Act is narrower in scope than the concept of internal controls, this Portfolio acknowledges the enormous impact of the legislation and analyzes a number of its provisions that touch on aspects of internal controls. The central and most controversial of these, §404, together with the rules promulgated by the SEC, requires a public company's management to assess periodically, and report annually upon, the effectiveness of internal controls over financial reporting. Management's report must be accompanied by an opinion of the outside auditor attesting to the reliability of management's conclusions.
The exact extent of the ultimate applicability of §404 to smaller public companies in particular remains in flux. The topic of internal controls at small companies will be analyzed in another Portfolio within the Accounting Policy and Practice Series.
This Portfolio may be cited as BNA Tax and Accounting Portfolio 5402, Lorne, Smalley and Schultz, Internal Controls: Sarbanes-Oxley Act §404 and Beyond (Accounting Policy and Practice Series).
Simon M. Lorne, B.A., Occidental College (1967, cum laude; Phi Beta Kappa); J.D., University of Michigan Law School (1970, magna cum laude; Order of the Coif); partner, Munger, Tolles & Olson, LLP (1970-1993; 1999-2004); managing director, Salomon Brothers Inc., responsible for global internal audit (1996-1999); general counsel, Securities and Exchange Commission (1993-1996); has taught at the University of Pennsylvania, USC and NYU law schools; serves as co-director of the Directors' College, Stanford Law School; has lectured at Stanford University, University of Michigan, Cornell University and UCLA and frequently speaks on securities law and corporate governance matters; author, Acquisitions and Mergers: Negotiated and Contested Transactions (multi-volume treatise, West Securities Law Series), A Director's Handbook of Cases (CCH), and numerous articles in professional journals; currently Vice Chairman and Chief Legal Officer, Millennium Partners, L.P., a multi-strategy hedge fund.
Kathleen Smalley, B.A., Rice University (1978, summa cum laude, Phi Beta Kappa); J.D., Harvard Law School (1981, magna cum laude); law clerk, Judge John Minor Wisdom, U.S. Court of Appeals, and Justice Sandra Day O'Connor, U.S. Supreme Court; Adviser, American Law Institute, Restatement (Third) Torts: Economic Torts; has served as general counsel of public and private companies and as trustee of a public pension fund, where she was a member of the audit committee and chair of the board governance committee; has taught at Harvard, Stanford, Yale, UCLA and SMU law schools; has lectured at Stanford Business School, UCLA's Anderson Business School, Columbia University's law and business schools and MIT's Sloan School; in private law practice, currently consults on real estate, finance, and corporate governance.
Jeffrey L. Schultz, A.B., Princeton University (1990, magna cum laude); J.D., University of Virginia (1994); M.P.A., Kennedy School of Government, Harvard University (2004); associate, corporate and securities law, Shearman & Sterling LLP and Akin, Gump, Strauss, Hauer & Feld LLP; has served as general counsel of a start-up sports media venture; has contributed to a treatise on international debt markets, and is the author of a study on U.S. constitutional and foreign relations law; currently Assistant General Counsel, Millennium Partners, L.P.
