Sarbanes Oxley

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Sarbanes - Oxley

• What does it mean to you?

Mark Link Vice President and Chief Accounting
Officer EMC Corporation
March 4, 2004
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The Act Is Far Reaching
Accounting Firms
Investment Banking Firms
Credit Rating Agencies
SEC

• Business

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Whats All the Noise About? Rule 404

• Requires an annual statement by management in its
  10-K that
• Management is responsible for establishing and
  maintaining an adequate internal control
  structure and procedures for financial reporting
• Management has assessed the effectiveness of its
  internal control structure and procedures for its
  financial reporting
• The companys auditor is required to attest to
  managements assertion about the effectiveness of
  internal controls

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The Documentation Begins
Financial Statements
Significant Accounts
Processes
Sub-Processes

• New hire compensation
• Time and vacation
• Reporting
• Benefits

• Material Purchases
• Depreciation
• Payroll and benefits
• expense

Payroll
Cost of Sales
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The Documentation Begins

• Control Environment
• Tone at the top
• Oversight Committees
• Corporate policies and procedures

• Monitoring Controls
• High-level management review
• Budget to actual comparisons
• Internal audits

• Detailed Level Controls
• Preventative controls
• Detective controls
• Manual controls
• Automated controls

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Control Objectives
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At This Point

• You have identified your sub-processes
• You have identified your controls
• Now you need to determine whether your controls
  meet your control objectives

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Travel - Example
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Testing, Testing, Testing

• Choice of key controls
• Higher level controls
• Controls that address multiple error types
• Preventative vs detective
• IT vs manual controls
• Material locations
• Level of testing

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Concluding on the Test Results
Inconsequential
Significant Deficiency
Material Weakness
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How do you make sure all travel related costs
have been recorded?

• for the proper amounts?
• to the right General Ledger accounts?
• in the right accounting period?

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