What trends have surfaced as a direct result of the Sarbanes-Oxley Act?
Two major trends have emerged. One has to do with Section 302 of the Sarbanes-Oxley Act, which requires that public companies report, on a quarterly basis, any errors that have been found and corrected in accounting policy, etc. The second trend relates to Section 404, which requires disclosing any significant weaknesses in internal controls in the annual report. Based on our analysis, we found that companies reporting significant or, in its legal term, material weakness in internal controls that are part of corporate governance have gone down by 40 percent. These are ‘weaknesses’ in control systems that are in place that could result in exposure to fraud and misstatements leading to potentially unreliable information. For example, having only one person sign off on a check can be a material weakness that can be remedied by having two people sign a check of, let’s say, over $500. Companies have done a very good job in zeroing in on material weaknesses and enhancing the internal control
