The SEC rules clarify that management's assessment and report is limited to internal control over financial reporting.
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A. B.A
The statement is true. The Securities and Exchange Commission (SEC) has issued rules and guidance regarding the assessment and reporting of internal controls over financial reporting (ICFR) by management. According to these rules, management's assessment and report should be limited to ICFR, which refers to controls designed to ensure that financial statements are reliable and accurate.
Under Section 404 of the Sarbanes-Oxley Act, public companies must assess and report on the effectiveness of their ICFR. The SEC rules provide guidance on the scope of management's assessment and report, stating that it should be limited to ICFR and should not extend to other aspects of internal control, such as operational or compliance controls.
Furthermore, the SEC has clarified that management's report should provide a conclusion on the effectiveness of ICFR as of the end of the fiscal year being reported on. This conclusion should be based on management's evaluation of the design and operating effectiveness of the company's ICFR. If there are material weaknesses in ICFR, management should disclose them in the report.
In summary, the SEC rules clarify that management's assessment and report is limited to internal control over financial reporting, which refers to controls designed to ensure the reliability and accuracy of financial statements. Management's report should provide a conclusion on the effectiveness of ICFR, based on their evaluation of the design and operating effectiveness of ICFR.