Comments on: How does the Sarbanes-Oxley Act of 2002 affect the preparation and control of financial statements? http://compliancesarbanesoxley.com/sarbanes-oxley/how-does-the-sarbanes-oxley-act-of-2002-affect-the-preparation-and-control-of-financial-statements Compliance Sarbanes Oxley, A Resource Guide for New and Established Businesses Requiring Sarbanes Oxley Compliance Thu, 15 Jul 2010 14:03:59 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Frank112 http://compliancesarbanesoxley.com/sarbanes-oxley/how-does-the-sarbanes-oxley-act-of-2002-affect-the-preparation-and-control-of-financial-statements/comment-page-1#comment-150 Frank112 Thu, 28 Jan 2010 15:41:59 +0000 http://compliancesarbanesoxley.com/sarbanes-oxley/how-does-the-sarbanes-oxley-act-of-2002-affect-the-preparation-and-control-of-financial-statements#comment-150 For your first question, the act has demanded that management assess its own internal controls over financial reporting which leads them to mitigate risks of material mistatements due to errors or frauds. For the second one, ethics cant replace internal controls due to two reasons: 1. Mistatements due to errors are not caused by lack of ethics but lack of proper error mitigating controls (preventative and detective measures). 2. Management may include unethical people and you can't get as much assurance that management is ethical as you can from testing to see if a control is working.<br><b>References : </b><br>SOX auditor For your first question, the act has demanded that management assess its own internal controls over financial reporting which leads them to mitigate risks of material mistatements due to errors or frauds.

For the second one, ethics cant replace internal controls due to two reasons:

1. Mistatements due to errors are not caused by lack of ethics but lack of proper error mitigating controls (preventative and detective measures).

2. Management may include unethical people and you can’t get as much assurance that management is ethical as you can from testing to see if a control is working.
References :
SOX auditor

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