Is Sarbanes-Oxley working? Study suggests it is.

• Author: Marshall, Jeffrey
• Position: GOVERNANCE - Report

According to 2007 Financial Reporting & Internal Control Benchmarking Reports, it appears that over the past three years corporate America has made marked improvement in reducing risk and improving corporate governance and that, despite its flaws, Sarbanes-Oxley is likely forcing improved internal controls. The report, covering some 9,717 public held companies and their filings between November 2004 and May 2007, was spearheaded by Matt Kelly, managing editor of Compliance Week newsletter/magazine.

Notably, Kelly found that the early 2007 material weakness statements, required by Sarbanes-Oxley Section 404, fell to less than one-third the level seen during the 2004 period analyzed--from 537 disclosures in year one to only 173 in year three. Also, despite the subprime mortgage mess, financial services companies led all other eight sectors assessed, with energy/utilities also a bright spot.

On the downside, however, the report found that the same issues that dogged companies three years earlier--poor documentation of accounting procedures, insufficiently trained accounting and finance staffs and difficulty closing the books at yearend--still...