Monday, December 27, 2004

Forbes.com: Sarbanes-Oxley Confessionals

Dedicated readers of The Wall Street Journal are used to the full-page notices addressed to shareholders that either polish someone's image or solicit their support in a battle for corporate control.

This Tuesday, however, a whole new type of notice appeared--this time with the unlikely sponsorship of PricewaterhouseCoopers. The notice bears the eye-catching caption, "Public Trust Is About To Be Tested Again." Now, anyone with more than ten cents in the market knows these are words that will get more than one investor's pulse rate rising (just think Enron and Worldcom). Add to this that the words are coming from the public's mainstay for trust--namely the company auditors--and you really wonder what's afoot.

The purpose of the notice is to warn investors that the Sarbanes-Oxley Act is about to drop the other shoe. Specifically, under Section 404 of the Act, independent accountants are required to give their opinion on whether the company has material control weaknesses, which "could" cause a misstatement of results in the annual, or interim, financial statements. This is required even if there is no evidence that such a misstatement has happened or will happen.

Forbes.com: Sarbanes-Oxley Confessionals

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