Section 401 Unit 4

Title IV focuses on enhancing financial disclosures. Section 401 requires all financial statements prepared in accordance with GAAP to reflect all material adjustments identified by the auditors. The section also required the SEC to establish standards to address off-balance sheet transactions. Result was rules for consolidation of variable interest entities. Section 402 prohibits personal loans to directors and executive officers. Section 404 requires that management acknowledge its responsibility for establishing and maintaining adequate internal control over financial reporting and that management assess the effectiveness of internal control as of the end of the period. The section also requires the auditor to examine the design and operating effectiveness of internal control over financial reporting to provide a sufficient basis to report on management’s assessment. …show more content…
5. Section 407 requires the companies to disclose whether at least 1 member of its audit committee is a financial expert. Section 408 provides for enhanced review of periodic disclosures by Board. Section 409 requires issuers to disclose material changes in the financial condition or operations on a rapid and current basis. This title IV is focusing on making sure that financial statements are transparent and managements are not trying to hide anything away from investing public. Personal loans to executive officers and directors are not allowed since it happened to be an issue with Bernie Ebbers at WorldCom and Dennis Kozlowski and Mark Swartz at