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Sarbanes-Oxley Act forcing US Inc to dig out ‘skeletons’

Sarbanes-Oxley Act forcing US Inc to dig out ‘skeletons’

by Rick Turoczy on March 21, 2005

If the list of companies confessing to having a weak handle on financial reporting was small, critics of the internal control segment of the Sarbanes-Oxley Act might have a case. But the roster is long and has grown rapidly recently. So for all the huffing and puffing about the costs of complying with one of the final mandates of Sarbanes-Oxley, introduced in ’02 after a series of huge corporate scandals, there are clear signs that Section 404 of the Act is forcing companies to uncover some deeply buried accounting skeletons.

Regulatory estimates from a few weeks ago put the number of companies that have been forced to come clean at 500-600, of more than 10,000 corporations registered with the Securities and Exchange Commission (SEC).

Critics have argued the millions of dollars in extra auditing fees, to determine if financial controls are adequate, is money poorly spent, with no quantifiable return.

Yet, Section 404 may be keeping Corporate America honest, or at least focused, say accounting experts, adding that the benefits of raising investor confidence will, over time, substantially outweigh the upfront expenses.

Sarbanes-Oxley Act forcing US Inc to dig out ‘skeletons’

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