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

4.3. INFORMATION SOURCES

A great deal of information exists about publicly traded companies and the industries in which they operate. When planning your project, you are more likely to encounter problems related to having too much, rather than too little, information. For that reason, your information-gathering strategy should be selective.

Chances are that most of the information you need to plan an engagement can be provided by just a few sources. Rather than try to read an entire 10K, for example, you should instead target a few key sections of the 10K and then perform a thorough, in-depth reading. A discussion of the information sources that are most likely to provide the information you need to achieve the planning objectives described earlier in this chapter follows.

4.3.1. Sec Form 10K

Annually, publicly traded companies are required to file their Form 10K within 90 days of their year-end (soon to be 60 days under a proposed SEC rule). This form provides a great deal of narrative information about the entity, its industry, competitors, and business risks, in addition to the most recent financial statements. A targeted, in-depth reading of the 10K can provide you with a sound background for understanding key elements of the entity and its industry that affect risk and the design of internal control. Reading the 10K is especially valuable for the less-experienced members of the project team. You should consider your company's 10K as a primary source of information needed ...