How to Comply With Sarbanes-Oxley Section 404: Assessing the Effectiveness of Internal Control

7.7. COORDINATING WITH THE INDEPENDENT AUDITORS

Determining the nature, timing, and extent of your tests is a significant decision that will affect the ability of the independent auditors to attest to management's assertion. If the independent auditors determine that your tests were not sufficient to support your evaluation of the effectiveness of controls, then additional test work will be required. The scope of additional tests may be significant, and the performance of these tests could delay the preparation of the required report.

For these reasons, it is important that you review your planned procedures with the independent auditors before conducting a significant portion of the tests. Describe how these procedures build on your assessment of entity-level controls. Consider discussing how the testing strategy relates to the various financial statement assertions. Periodically, as the tests are performed and results received and evaluated, you also should consider discussing the progress of the tests with the auditors to confirm that the original plan is still sufficient for their purposes.

For example, you should establish an ongoing dialogue with the independent auditors to establish consensus on matters such as:

• The nature and extent of your planned procedures and whether these are considered sufficient to draw a reliable conclusion

• The circumstances under which the planned nature and extent of the procedures should be modified

• The planned timing of your tests, and whether ...