Wednesday, May 10, 2006

SOX rocks

A study by Lord & Benoit LLC finds that companies that have implemented internal checks and controls as required by Sarbanes-Oxley legislation (SOX) are rewarded by market-beating stock returns.
Further, even companies that perform internal checks, find irregularities, and correct them are rewarded by strong stock performance.

The full article is here.

This is not Lord & Benoit's first SOX study. An earlier study released in April concluded that that "the statistics raise questions" on whether small-cap and micro-cap companies can be relied upon to self-report material weaknesses in internal controls. Section 302 of the Sarbanes-Oxley law requires companies to self-report disclosure controls and requirements in internal controls.
Said Robert Benoit, president and director of SOX Research for Lord & Benoit, and author of the report, "From an ethical perspective, the report shows only 8 percent to 14 percent of the accelerated filers with material weaknesses self-reported their weaknesses. It was not until Section 404 that they were forthcoming. This kind of data makes me wonder."
Benoit added that about 50 of the companies studied had unethical behaviors, such as fraudulent reporting, employee fraud, Securities and Exchange Commission investigations, and accounting irregularities and misrepresentations.

Read more here.

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