Disaster recovery planning: what section 404 audits reveal

This article summarizes recent Sarbanes-Oxley Act (SOX) section 404 internal control reports that reveal material weaknesses due to inadequate disaster recovery planning. Section 404 currently applies to public companies with over $75 million in public float. Using the Audit Analytics database, the...

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Bibliographic Details
Published in:The CPA journal (1975) 2007-12, Vol.77 (12), p.60
Main Authors: Hermanson, Dana R, Ivancevich, Daniel M, Ivancevich, Susan H
Format: Article
Language:English
Subjects:
Accounting and auditing
Analysis
Back up systems
Contingency planning
Customer relationship management
Disaster recovery
Emergency management
Financial reporting
Internal controls
Methods
Onsite
Planning
Product development
Public companies
Public Company Accounting Reform & Investor Protection Act 2002-US
Publicly held corporations
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Summary:This article summarizes recent Sarbanes-Oxley Act (SOX) section 404 internal control reports that reveal material weaknesses due to inadequate disaster recovery planning. Section 404 currently applies to public companies with over $75 million in public float. Using the Audit Analytics database, the authors searched for reported material weaknesses in internal control from November 2004 (the effective date of section 404) through Aug 29, 2006, to identify which ones specifically related to disaster recovery plan (DRP). Among the 16 companies, there are 10 cases in which the deficiency appears to involve a general failure to implement a DRP or backup and recovery plan. In the event of a disaster, such companies would risk catastrophic damage, including the inability to file financial reports. SOX section 404 audits reveal some public companies with significant DRP-related weaknesses, and several indicated that remedial efforts were underway. The authors believe that many more private and small public companies are facing such challenges as well.
ISSN:0732-8435