In the Journal of Accountancy article entitled: Section 404 for Small Caps- Ease the Learning Curve for Small-Cap Companies, CAQ member firm, Marcum & Kliegman LLP, describes how their firm approached a SOX Section 404 audit and provides a “Top 10” list of SOX 404 best practices that they use in their internal training classes, client newsletters and public speaking engagements. The Top 10 list compiled by Marcum & Kliegman is as follows:

1. Start the process early
2. Prepare a comprehensive risk assessment
3. Develop Section 404 training for your staff
4. Advise clients to appoint a Section 404 team leader
5. Carefully monitor and evaluate the project team
6. Flowchart, flowchart, flowchart!
7. Keep the audit committee informed
8. Discuss deficiencies with management promptly and candidly
9. Keep current with new developments
10. Use the work of others

In addition, the article outlines the SOX 404 work that needs to be done; the guidelines that the auditor should follow in fulfilling their responsibilities in a SOX 404 audit; suggests a SOX 404 road map to use; speaks about the firm’s lessons learned; and encourages firms to integrate the financial statement audit with the audit of internal control. We encourage member firms to read this article for best practices that they may want to consider in developing their firm’s approach to SOX 404 audits. If there are additional best practices that you would like to share with your fellow CAQ member firms, please submit them to the Center at caq-feedback@aicpa.org.

For additional assistance with SOX matters, call the CAQ Resource Line at 888-817-3277 or send an email to center@aicpa.org.