Considerations for Sarbanes-Oxley Act Certification

08/02/2002

To Our Public Company Clients:

As discussed in our Alert dated July 31, 2002, Section 906 of the Sarbanes-Oxley Act of 2002 (the “Act”) requires, effective immediately, that CEOs and CFOs of all public companies certify the accuracy of their company’s periodic reports on Forms 10-Q and 10-K.  While there will be many procedures that companies implement on a longer term basis in connection with the Section 906 certification, the following should be considered in light of the limited period of time prior to the first certification, which, for many companies, will be the Form 10-Q due August 14, 2002.

August 14 Recommendations

In connection with executing the certificates, CEOs and CFOs should consider taking the following kinds of steps:

  • Be involved in the drafting stage of the report and not just the final version

  • Keep an appropriate record of their questions and comments on the report to document their course of inquiry

  • Develop a checklist of questions to guide meetings with other company officers; the typical management letter to auditors may be used as a guide

  • Meet with senior operational and administrative officers to review the report to:

    • Obtain their confirmation that, in their areas of responsibility, the report complies with the Exchange Act and that the information in the report fairly presents, in all material respects, the financial condition and results of operations, including off-balance sheet transactions and related party transactions

    • Obtain their confirmation that they have no concerns regarding the report and that they believe no additional information exists that could materially affect the company that needs to be disclosed

    • Review with them the procedures taken to satisfy themselves of the accuracy and completeness of information provided in the report and obtain their confirmation that they followed the company’s existing procedures for accumulation and verification of the accuracy of information in the report and that they are satisfied with the procedures

    • Ask questions about any items in the report or other matters that are unclear and keep a record of such inquiries

  • Meet with independents auditors to:

    • Obtain their confirmation that the financial statements in the report fairly present, in all material respects, the financial condition and results of operations, including off-balance sheet transactions and related party transactions

    • Obtain their confirmation that they have no areas of concern regarding the report and that they don’t believe any additional information exists that could materially affect the company that needs to be disclosed

  • Meet with inside and outside counsel to review the report to:

    • Discuss compliance of the report with the Exchange Act

    • Obtain their confirmation that they have no concerns regarding the report and that no additional information exists that could materially affect the company that needs to be disclosed

  • Meet with the audit committee to:

    • Review and discuss the report

    • Describe the report-preparation process and the content and results of meetings with senior operational and administrative officers, independent auditors and attorneys

    • Describe concerns raised during meetings with senior operational and administrative officers, independent auditors and attorneys and actions taken

  • Have senior operational and administrative officers certify in writing to the CEO and CFO that, within their areas of responsibility:

    • the report complies with the Exchange Act and that the information in the report fairly presents, in all material respects, the financial condition and results of operations

    • they believe the report is accurate and no additional information exists that could materially affect the company that needs to be disclosed

  • Have the general counsel document the review process and procedures followed

Additional Certification Requirements

These recommendations relate only to the Section 906 certification requirement.  CEOs and CFOs of certain large public companies are also required to file certificates pursuant to the SEC’s June order.  Finally, the SEC will publish rules by August 29, 2002, relating to Section 302 of the Act, which has its own certification requirements.

Further Information

This Alert is a publication of Haynes and Boone, LLP and should not be construed as legal advice on any particular facts or circumstances.  This Alert is for general informational purposes only, and may not be quoted or referred to in any other documents or legal proceeding without our prior written consent.  The publication of this Alert is not intended to create an attorney-client relationship.

If you would like to learn more about the Act and the rules and regulations relating to the Act, please feel free to contact your regular Haynes and Boone attorney or any member of our Corporate Governance Practice Group above.

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