Monday, November 15, 2004

Sarbanes Oxley internal control rule hits today

Firms with fiscal years ending after Nov. 15, including financial giants like Morgan Stanley (MWD), Goldman Sachs (GS), Bear Stearns (BSC) and Lehman Brothers (LEH) are now required to prove in their annual reports that they've tested and documented their sales, assets and liabilities in a way that complies with the sweeping Sarbanes-Oxley law of 2002.

The post-Nov. 15 deadline applies in particular to companies with a market capitalization of more than $75 million. Passed in the wake of the Enron and WorldCom scandals, the Sarbanes-Oxley Act was broadly aimed at combating financial fraud and protecting investors.

But the results of the first-time reports could throw investors some curve balls.

"The big unknown here is really what those statements are going to say," said David Richards, president of the Institute of Internal Auditors. Another uncertainty, he adds, is "how the marketplace is going to react to the statements made by management and the external auditors." Outside audit firms must sign off on a company's own assessment of its internal controls.

Sarbanes Oxley internal control rule hits today

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