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Tuesday, July 26, 2005

SOX 404 Deficiencies Preceded By "Effective" 302 Reports

The fact that hundreds of companies came clean about potential internal control problems as the Sarbanes-Oxley Section 404 deadline approached isn’t terribly surprising. What is surprising, says one researcher who recently analyzed the disclosures, is that most of those companies had said not too long before that their internal controls were effective.

Among 366 companies that received a qualified opinion on the effectiveness of internal controls through May 2, 2005, 94 percent had previously certified their controls as effective as recently as the quarterly filing previous to the SOX 404 annual report. According to a report by proxy research firm Glass, Lewis & Co., the data suggest that the certifying officers of the companies “were using a rubber stamp to certify the effectiveness of internal controls prior to SOX 404.”

posted by Brian Moran @ 8:27 AM   0 comments


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