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The Sarbanes-Oxley Act of 2002 – Does It Matter?

5th October 2011 Posted in Blog, Documentation 0 Comments

Enron - SOX Technical Writing Post Image

Enron – just the sight of that word makes people cringe. But what does this have to do with technical writing? More than you might realize.

Because of fewer rules about documentation, Enron and other companies were able to pull off many financial tricks, allowing the higher ups to make money, while the investors were left with nothing.

That’s where the Sarbanes-Oxley Act of 2002, and more specifically Section 404 become important to those who are writing documents.

Here’s what the act states:

“Publicly traded companies must establish, document, and maintain internal controls and procedures for financial reporting. It also requires companies to check the effectiveness of internal controls and procedures for financial reporting.

To do this, companies must

  • Document existing controls and procedures that relate to financial reporting.
  • Test their effectiveness.
  • Report on any gaps or poorly documented areas.”

If there are any gaps in documentation, that’s where a technical writer will step in and close the gaps with more information, changes to previously submitted information, etc.

Other 404 standards require that managers:

  • “Assess both the design and operating effectiveness of selected internal controls related to significant accounts and relevant assertions, in the context of material misstatement risks;
  • Understand the flow of transactions, including IT aspects, in sufficient detail to identify points at which a misstatement could arise;
  • Evaluate company-level (entity-level) controls, which correspond to the components of the COSO framework;
  • Perform a fraud risk assessment;
  • Evaluate controls designed to prevent or detect fraud, including management override of controls;
  • Evaluate controls over the period-end financial reporting process;
  • Scale the assessment based on the size and complexity of the company;
  • Rely on management’s work based on factors such as competency, objectivity, and risk;
  • Conclude on the adequacy of internal control over financial reporting.”

Imagine what life would be like now if the Enron documentation had been in order. Imagine what might have been caught before it got out of hand.

Related: Avoid the SOC Documentation Nightmare with These 5 Tips

Has enactment of Sarbanes-Oxley (SOX) affected you as a technical writer? If so, how? We’d love to hear from you. Please leave a comment.

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