Sarbanes-Oxley

To Our Clients and Other Friends

Many companies are approaching their deadline to implement Section 404 of the Sarbanes-Oxley Act of 2002 (the Act), and the need for effective coordination and communication of related activities is more crucial than ever. Ernst & Young continues to provide information we have gathered about Section 404 implementation activities from our ongoing survey work and discussions with major companies across all industries. We hope you find this information useful as your company completes its efforts to report on the effectiveness of internal controls over financial reporting.

Beginning in December 2003, we polled companies on their experiences during the early phases of Section 404 implementation. This survey was summarized in our Emerging Trends in Internal ControlsInitial Survey publication. After several months we carried out a follow-up survey, supplementing our findings with observations and analysis based on our interactions with clients, as well as non-client executives. Emerging Trends in Internal ControlsSecond Survey was published in May 2004. Our current survey was completed in September 2004, and, like the previous two surveys, draws from a cross-section of industries. Following on previous publications, this third survey identifies key issues companies are facing as they approach the deadline for completing their initial assessment of internal control.

Specifically, the third survey covers:

• Project progress and level of effort
• Testing and remediation: who, what, and how much?
• Leadership and oversight
• Looking ahead to next year and beyond

We hope our continuing research and communications are helpful in your companys ongoing efforts. We continue to seek your comments and questions, and welcome the opportunities to discuss additional information with you. Please contact Tom Bussa, global director of Business Risk Services, at Thomas.Bussa@ey.com, or your local Ernst & Young office.
Emerging trends in internal control - third survey)