*Recorded *Processed *Summarized, and *Reported

within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

The above definition has a wider implication than that of section 404, which concentrates solely on internal controls.

Indeed, 13a-15(e) concerns all material financial and non-financial information in Exchange Act reports. An example is the Form 10K.

Section 404 is much more narrow, with its emphasis on the effectiveness of internal control in giving assurance on the accuracy of financial reporting.

Consider the company in question is awarded a new contract which increases turnover by 50%.

Prior to the collapse of Enron and WorldCom, the company would have considered this as constituting a significant transaction and requiring disclosure in the relevant filings.

Post-Enron and WorldCom and now with section 404, a lot more work is needed. The management and auditors would need to look at the internal controls surrounding new contracts. These might include heavy emphasis on the control environment and risk assessment areas for instance.

Why? The legislation referred to is the Exchange Act 1934. Introduced at the end of the Depression it is the bedrock of investor protection in the U.S.

Disclosure controls and procedures should ensure that the financial affairs of public companies are transparent. Investors had assurance that all all materially important information was available to them.

Anecdotal evidence suggests that companies with well designed, managed and effective, disclosure controls and procedures have handled the introduction of section 404 much better than those without.

Who All public companies that are required to file reports with the SEC.

Within the company the management are ultimately the people who make the decision, which information to disclose. Conversely they are also the ones who design and operate the disclosure controls.

How Assuming the company has formed a disclosure committee a number of actions can be taken.

Disclosure control considerations

*Conduct a review of SEC filings including 10Q, 10K. Earnings releases and other public information. *Determines what constitutes a significant transaction. *Determination and identification of significant deficiencies and material weaknesses in the design or operating effectiveness of disclosure controls and procedures. *Assess the awareness of the CEO and CFO of material information that could affect disclosure.

We have to remember that disclosure controls is not a one size fits all. A million dollar contract for Exxon is probably not a significant transaction.

A million dollars for a small firm with a $5m turnover, certainly would be.