How many companies disclose material weaknesses in internal control?
Glass Lewis & Co. found that 1,118 U.S. companies and 90 foreign companies—one of every 12 companies with U.S. listed securities—filed a total of 1,342 material weakness disclosures in 2006. Furthermore, 97 U.S. companies voluntarily disclosed significant deficiencies in 2006, down from 116 in 2005 (see “The Materially Weak,” Yellow Card Trend Alert, February 27, 2007). This total includes both SEC registrants currently required to have integrated audits, and those not so required. Companies that were required to disclose section 404 material weaknesses in 2006 reported 35% fewer material weaknesses than in 2005, while companies voluntarily disclosing such weaknesses reported 20% more. Exhibit 1, using data from the Glass Lewis & Co. study, shows material-weakness disclosures by stock exchange. Compliance Week added to the analysis, finding that while the number of companies that cannot meet filing deadlines may have risen in the second year of SOX compliance, fewer companies reported
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