Criticism of the law has centered on Section 404, which requires top corporate managers and outside auditors to assess the adequacy of financial controls. Controls are checks and balances designed to prevent fraud and financial mistakes.
Business leaders, including representatives of the U.S. Chamber of Commerce, have called on lawmakers to reopen the act to make "technical improvements," a term used for after-passage changes in big tax legislation. But regulators and the law's sponsors have said the SEC and the accounting oversight board can act to ease corporate concerns without congressional intervention.
Already information is making its way to the marketplace about the first round of control reviews. About 8 percent of the 2,500 companies that filed annual reports as of March 31 have reported key weaknesses in their controls. That percentage is likely to rise after smaller companies begin filing their reports, accounting experts said yesterday.
Data presented by PricewaterhouseCoopers LLP, the nation's biggest audit firm, said a study of 225 audit clients identified nearly 63,000 control problems, or about 275 per company -- most of which were fixed by the end of the review process.
So far, investor response has been mixed. Gregory J. Jonas, an official at Moody's Investors Service, said his rating agency has downgraded 12 of 71 companies it follows that recently reported control problems.
J. Michael Cook, a board member at Comcast Corp. and Dow Chemical Co., among other companies, said he had "refereed many heated, spirited fee discussions" between corporate managers and auditors over the new requirements. "The best we can hope for is that all parties are equally unhappy," Cook said. "It's been a tough go."
Financial Executives International, a trade group for finance executives, said the reviews cost an average of $4.4 million per company, with big firms shelling out far more. A study by the four biggest accounting firms suggests that fees for performing Sarbanes-Oxley work could fall by as much as 46 percent next year.
"If those costs are likely to prevent . . . choose your favorite accounting scandal here, that's money well spent," said Mark J.P. Anson, chief investment officer at the California Public Employees' Retirement System.