302 and testing 2692

  • I am hoping to get ideas on how companies test the process for filing their 10-Q and 10-K. The filing of the 10-Q/K is a separate process in our audit universe and we test management’s preparation, review, and filing of each. Also included in the testing is the disclosure committee’s review and sign-off. Any ideas are greatly appreciated.

  • Hi,
    Sorry for the long delay and I just noticed that no one has responded. Anyway…
    SOX testing in connection with the 10-K and/or 10-Q entails reviewing the operating effectiveness of the related controls. Generally, you can review the process to ensure that the preparer of these forms has agreed the financial information to the key amounts and balances in the financial system.
    Most companies use MS Office (Excel and/or Word) so it is important to test the controls that are in place to ensure that the data that is used to develop the SEC report(s) is complete, accurate and agrees to the source reports.
    Many companies make use of checklists such as those to ensure that required disclosures are made in the financial reports. So it might be helpful to review the checklist to ensure that the prepare is using it and initials the key items to evidence that he/she has considered all required disclosures in the preparation of the financial reports.
    Also, the preparer should initial the financial reports that he/she prepared and someone other than the preparer should review them too. This serves as a check and balance on the production of the financial reports and from a practical standpoint, makes it easier to identify errors since the preparer is not objective to his/her own work product.
    I hope that this helps,

  • Thanks for the detailed information. We are currently doing all the procedures you listed below. However, we have decided to perform more detailed testing around the controls for the documentation received in Excel documents.

  • I recommend to test disclosures that have been newly required or changed due to recent changes in the SEC’s rules and forms.
    While reviewing annuals reports of foreign private issuers on form 20-F (which are similar to 10-Ks), I noticed that sometimes they simply overlooked that the SEC required new additional disclosure (especially in the area of corporate governance, internal control and disclosure controls and procedures).
    You can also check on sec.gov whether the issuer received any comments from SEC staff and whether the issuer had to amend annual or quarterly reports in the past. This will provide a first idea whether there have already been problems in the past.

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