This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Firms Cram for Passing Grade on Sarbanes

Updated from 4:14 p.m. EST

Hundreds of public companies soon may get a failing grade on a key Sarbanes-Oxley-related report. As disturbing as that may sound, some observers are more worried about how investors will react to such news.

Many observers consider the reports, which were intended to prevent the next Enron-type debacle, to be the key provision of the Sarbanes-Oxley Act. But some accounting experts and regulators are warning investors that just because a company turns in an imperfect report doesn't mean it's a corporate scandal in the making.

"It's important that investors have an understanding of what the material weakness is," added Erica Sulkowski, special adviser to the chief accountant of the Securities and Exchange Commission.

But Grace Hinchman, senior vice president of Financial Executives International, warned, "The public at large may not understand that. That's a real concern."

However, some corporate watchdogs think companies have little excuse for the poor reports, which concern a company's so-called internal controls.

That so many companies may get a failing grade on their internal controls reports is "really fascinating," said Nell Minow, founder of the Corporate Library, a watchdog and research group. "They were supposed to have these controls in place for 30 years, and only now are figuring out that there's a problem."

Internal controls are essentially a system of checks and balances designed to prevent corporate fraud. An example of such a control might be a provision that the person in charge of approving expense reports not be the same person who is in charge of cutting checks.

While federal law has long required public companies to have such systems, Sarbanes-Oxley mandated companies for the first time to assess annually the state of their controls, and required auditors to scrutinize them as well.
1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
GE $24.50 -0.28%
FB $88.25 -1.80%
GOOG $606.89 -1.20%
TSLA $246.36 -0.54%
YHOO $32.50 2.30%

Markets

Chart of I:DJI
DOW 16,391.37 +39.99 0.24%
S&P 500 1,954.44 +5.58 0.29%
NASDAQ 4,746.2410 -3.7380 -0.08%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs