Which statement accurately describes the requirements of Sections 302 and 404 of the Sarbanes-Oxley Act with respect to financial reporting and internal controls?

• A. Section 302 requires senior corporate officers to certify the accuracy of financial statements and disclosure controls, while Section 404 requires management and the external auditor to assess and report on the effectiveness of internal control over financial reporting.
• B. Section 302 relates to whistleblower protections; Section 404 defines penalties for fraud.
• C. Section 302 sets auditing standards; Section 404 deals with corporate governance practices.
• D. Section 302 and 404 are not connected to financial reporting.

Answer: (A)

These sections focus on accountability for financial reporting and the evaluation of internal controls. Section 302 requires senior corporate officers, typically the CEO and CFO, to personally certify the accuracy of the company’s financial statements and the effectiveness of disclosure controls and procedures. This creates explicit personal accountability for the numbers and the processes behind them.

Section 404 shifts the emphasis to internal controls over financial reporting. It requires management to assess and report on the effectiveness of these controls, and it requires the external auditor to attest to management’s assessment. This pairing provides both a management responsibility statement and independent verification of the control framework supporting financial reporting.

So, the correct description is the one that links certification of financial statements and disclosure controls (by senior officers) with an external auditor’s attestation of the effectiveness of internal controls over financial reporting. The other statements mix up topics (whistleblower protections, penalties, auditing standards, or governance practices) that are not the focus of these two sections.