The Wall Street Journal reports that more than 500 companies have reported deficiencies under the Sarbanes-Oxley Act. In most cases, the deficiencies uncovered by costly internal control assessments were inconsequential. An auditor, whose services corporations are forced to pay for, claims the law is “first and foremost aimed at restoring investor confidence.”
Eastman Kodak recently disclosed errors in its income-tax accounting and said it expected its auditor to issue an adverse opinion on its internal controls. Despite the “bad news,” Eastman Kodak’s stock rose after the announcement. Many other companies announcing problems under Sarbanes-Oxley saw their stocks decline by small percentages, refuting the notion that Sarbanes-Oxley has any impact on investor confidence.
“Financial Executives International, a membership and advocacy group for financial executives, claims companies will spend an average of $3 million apiece to comply with the rule. Companies with more than $5 billion in revenue are expected to spend about $8 million on average, while companies with less than $100 million in revenue are expected to spend about $550,000 on average.”