The public outcry over section 404 has succeeded in postponing management reporting for smaller entities
It has been five years now since the Sarbanes-Oxley Act was enacted; much of the criticism against it has been directed against section 404, which requires a company to include in its annual reports, management’s assessment on the company’s internal controls over financial reporting as well as an auditor’s report on that assessment. As required by the Act, the Public Company Accounting Board (PCAOB) adopted auditing standard no. 2 to apply accounting standards to the newly required audits.
