Actual impact in failing SOX 961



  • I think some companies in US have passed through the SOX audit. Does anyone notice about the actual impact for those companies failed their audit? Please advise. Thanks.



  • I think some companies in US have passed through the SOX audit. Does anyone notice about the actual impact for those companies failed their audit? Please advise. Thanks.
    Failed the audit… Let’s discuss it.
    After Auditing standard No 2, it is clear that auditors give two opinions:

    1. On management’s assessment
    2. Their own opinion on the effectiveness of internal controls
      Auditors issue 3 types of opinions for each of the 2 above opinions
    3. Unqualified opinion - management’s assessment is fairly stated. There are no identified material weaknesses and there have been no restrictions on the scope of the auditor’s work.
    4. Qualified in Scope - except for the effect of limitations in the scope, everything is ok.
    5. Adverse opinion - either the management’s assessment is fairly stated, or the internal controls are not effective.
      The impact for companies that failed their audit - it depends (sorry, I am a consultant and I can not stand using these two words…)
    6. There are criminal fraud provisions.
      Example: A CEO who knowingly signs off on inaccurate financial statements - punishable by up to 10 years in jail and USD1 million in fines. A CEO who willfully signs off on inaccurate financial statements - punishable by up to 20 years and a USD5 million fine.
    7. Your investors will be unhappy, and after that you will be very sorry.
      You must disclose everything.
      Example:
      MATERIAL WEAKNESS IDENTIFIED As part of their review of our condensed consolidated financial statements included in this quarterly report on Form 10-Q, Ernst and Young LLP, our independent auditors, informed us and our audit committee that we had incorrectly included certain foreign currency translation adjustments in our statement of operations for the three month period ended October 2, 2004 rather than reflecting such adjustments as cumulative translation adjustments within shareholders’ equity on our balance sheet for that period in accordance with FAS 52, Foreign Currency Translation. As a result, our net loss for the three month period ended October 2, 2004 was USD38.3 million, rather than USD37.1 million as previously reported in our earnings press release issued on October 26, 2004. Ernst and Young advised us that this condition is a material weakness in our internal control over financial reporting. We have reviewed the appropriate application of FAS 52 with Ernst and Young and are in the process of implementing procedures designed to assure its proper allocation in the future
    8. Failure to establish and maintain an adequate internal control structure and procedures for financial reporting can result in delisting.
      Regulators, shareholders, and plaintiffs’ attorneys are scrutinizing companies and boards more closely than ever…
      It is a huge issue, I feel that I have written only a few words about that 8O

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