New Section of Sarbanes Oxley to Go Into Effect

Law.com reports that many public companies are racing to with setion 404 of the Sarbanes Oxley Act which goes into effect today.  The section requires requires companies to set up and test internal financial financial controls for items such as cash balances and inventory in an effort to ensure accuracy.

In addition to the adopting internal controls, companies must also submit to regular financial audits and retain outside auditors to check and approve their internal controls.   Essentially this means that companies must now submit to two audits, one for the numbers and one for the controls.

While the cost of compliance will likely become more reasonable as companies become more familiar with section 404, on average, public companies are expected to pay an average of $3.1 million to comply with section 404 this year.