What is a requirement of the Sarbanes Oxley Act regarding internal controls over financial reporting?

The requirement of the Sarbanes-Oxley Act regarding internal controls over financial reporting emphasizes the necessity for companies to conduct annual evaluations of their internal controls. This evaluation must be documented and the results reported alongside the company's financial statements. Specifically, Section 404 of the Act requires management to assess and report on the effectiveness of internal controls, ensuring they are properly designed and functioning effectively to prevent and detect material misstatements.

The requirement for management to include a statement in the quarterly report is not stipulated by the Sarbanes-Oxley Act itself; rather, it requires this reporting in the context of annual reports. Additionally, preparing a report only when issues arise does not align with the proactive nature of the Act, which aims for ongoing assessment and control over financial reporting rather than reactive reporting. Quarterly evaluations of changes affecting internal controls might be a good practice, but the primary obligation established by the Sarbanes-Oxley Act, particularly under Section 404, focuses on annual evaluations instead.