How to Comply with Sarbanes-Oxley Section 404: Assessing the Effectiveness of Internal Control [Hardcover]

This book does not much dwell on the details of Sarbanes-Oxley - the reader is assumed to have an understanding of the salient details - but, instead lays out a comprehensive action plan for complying with Section 404.

The author begins with three chapters covering the overall goals and objectives, roles and responsibilities, assessment issues, and an excellent chapter about internal control criteria. Each of these chapters ends in appendices that support the compliance initiative.

Milestones, covered in Chapters 3 through 7, are clearly defined with respect to what it will take, key issues, and appendices that provide examples, guidelines, checklists and other material that support compliance. I was impressed by the straightforward approach, the complete and clear identification of all issues - and especially so regarding IT, developing documentation, and testing the controls - and the fact that the control objectives were carefully mapped to the COSO Framework.

If you want a realistic view of the scope and complexity of Section 404 compliance this book will provide it. If you are an IT professional I strongly recommend visiting Information Systems Audit and Control Association (ASIN B00006BW74), which makes available a free 84-page document titled "IT Control Objectives for Sarbanes-Oxley". For more general information, there is a commercial site that provides news and updates on Sarbanes-Oxley issues (ASIN B0000AM23N), as well as the Public Company Accounting Oversight Board (ASIN B00013Y80Y), which provides rule making information and a means to comment on proposed rules. You can reach these sites by pasting the ASIN numbers in the search box at the top of this page, selecting all products and clicking GO.

The fact that section 404 doesn't go beyond a high level statement about "internal controls" means that IT SOX audits are making it up as they go. There is a desparate need for more detailed, authoritative guidance in this area. Unfortunately, though Ramos' book makes a contribution to the general audit literature around Sarbanes-Oxley, it does not advance things for the IT professional. If you are this kind of person, I recommend not buying this book and instead continuing to rely on the resources available on the web, mostly downloadable for free, such as the IT Governance Institute's "IT Control Objectives for Sarbanes-Oxley".

Let's face it. Most people think that auditors are lifeless, unemotional drones who move with a single minded efficiency in reviewing financial records, controls and other sundry items to ensure that the financial statements of a company are free of material misstatements and that they are accurate. In fact, Andersen auditors were often referred to as "Andersen Androids". But for most people in a corporation, that was fine because they had no real need to worry about or understand accounting and business control concepts. Put an auditing textbook in front of them and you could watch their eyes glaze over.

Section 404 of the Sarbanes-Oxley (SOX) Act changes all of that, especially for line of business managers and information technology professionals. Every day I talk to people who are faced with trying to understand SOX and implementing systems to support SOX requirements. There is often frustration in their voices or emails as they lack an effective roadmap. In How to Comply with Sarbanes-Oxley Section 404: Assessing the Effectiveness of Internal Controls (290 pages, John Wiley and Sons, Inc, 2004. 290 Pages), Michael Ramos sets out to provide an understanding of how Section 404 of SOX came to be, what it requires, what is not required, and a roadmap for assuring compliance.

It is not an easy task to present a comprehensive guide to aid with Section 404 compliance, but Ramos delivers in this book in ways that many others have tried and failed. Ramos is a CPA and an auditor by training and background. He starts from the explaining the responsibilities of an information systems auditor and very basic concepts of business controls, which allows every reader of the book to start with a common framework. His writing leads a reader to integrate, weave and understand what controls are and how they fit into the compliance process. He writes it in a way that does not talk down to the reader, but engages them in a thoughtful conversation as a good teacher would in a classroom.

The book is intended to be a guidebook and a reference and its utility for this purpose will not disappoint. After laying the groundwork, Ramos leads the reader through every step of the audit processes associated with Section 404 compliance. He helps the reader understand what the auditor will be looking for and reviewing. He examines the role of automated compliance tools, including the pros and cons of their use. He helps the reader to understand the different types of controls, the different kinds of risk and what "materiality"means when reporting deficiencies. In fact, if there is one lesson to take from this book for non-auditors, materiality is not based on what YOU think is a deficiency that will impact your view and acceptability of a system, but the view of the users of a system and/or any information generated by the system.

Who should read this book? It should be read by ALL C-level officers of an organization so they understand the concepts and the processes. It should be read by all members of an organization's audit committee so they too have an understanding. It should also be read by information systems managers so they understand that they are not operating in a silo that is independent of the rest of an organization, but that they are a fully integrated part of an ecosystem designed to support business objectives and sound corporate governance. They also need to be able to communicate with their staff about the importance of sound controls. And last but not least, it should be read by and incorporated into the toolkit of every IS Auditor.

This is not a cheap book (US$65.00), but as the best, most comprehensive guide to Section 404 compliance out there, it is worth every penny. The implementation and evolution of tools and processes associated with Section 404 of the Sarbanes-Oxley Act will bring about technical business and cultural changes in the way business is managed so that sound corporate governance is in place. This book will more than help you manage the change effectively.

The Business Controls Caddy Scorecard: Double Eagle on a long Par 5.

Christopher Byrne

"The Business Controls Caddy"

http://www.controlscaddy.com/