Question

Which of the following is not a requirement of SOX Section 404?

a. Evaluate the design of the company's controls to determine if they adequately address the risk that a material misstatement of the financial statements would not be prevented or detected in a timely manner.
b. Gather and evaluate evidence about the operation of controls.
c. Implement key controls to determine their operating efficiency.
d. Present a written assessment of the effectiveness of internal control over financial reporting.

Answer 1

Option (c), 'Implement key controls to determine their operating efficiency,' is not a requirement of SOX Section 404. SOX Section 404 requires evaluation and presentation of the effectiveness of internal controls, not their implementation.

Step-by-step explanation:

The Sarbanes-Oxley Act (SOX) Section 404 deals with the requirements for internal control over financial reporting. The three requirements listed (a, b, and d) are indeed part of what SOX Section 404 mandates:

• (a) requires the company to evaluate the design of internal controls,
• (b) mandates the gathering and evaluation of evidence regarding the operation of these controls,
• (d) requires the presentation of a written assessment of the control's effectiveness.

However, option (c) Implement key controls to determine their operating efficiency, misrepresents the requirements of SOX Section 404. The implementation of key controls is not a requirement under this section; instead, this section is concerned with assessment, not implementation. Therefore, option (c) is not a requirement of SOX Section 404.