Thousands of public companies and their auditors are racing to meet year-end deadlines that require them for the first time to certify the strength of their financial checks and balances, an intense and costly effort that regulators call the most important reform to spring from the recent wave of accounting scandals.

Scores of companies are struggling to finish the process on time, and a significant minority lags in the work, according to industry experts. If companies do not fix serious weaknesses, or do not complete the review, they must disclose those shortcomings in annual reports -- and face consequences as great as personal liability for executives and a possible plunge in stock price.

Two of the country's biggest accounting firms, PricewaterhouseCoopers LLP and Ernst & Young LLP, recently dispatched report cards to clients, warning that many companies were falling behind schedule and still might have serious internal weaknesses to report as of Dec. 31.

Dennis R. Beresford, a former accounting industry official who teaches at the University of Georgia, said the new rules have led to acrimony between auditors (who insist on caution and extra work) and corporate financial officials (who must personally sign off on the reviews and at the same time control rising costs).

The tension arises because both auditors and financial managers are under the gun in an unprecedented way, scrambling to document hundreds of basic business processes, such as making sure that all checks require signatures from two corporate executives, under substantial time constraints. The reviews are mandated under the 2002 Sarbanes-Oxley Act, which aims to combat accounting trickery.

"Management wants to get good marks," said Daniel F. Akerson, a former chief financial officer at MCI Communications Corp. who leads the audit committee at American Express Co. "Auditors worry if they dress things up too much to make boards and management happy, it's going to come back on them, too."

Privately, some companies and audit firms are pointing the finger at each other for not pouring sufficient resources into the effort, which has consumed vast amounts of money and management attention.

General Electric Co. officials, among the first to embrace the need to meet the stricter standards early last year, said they shelled out $30 million to get their controls in shape. Other large companies said they expect to pay an average of $3 million, if not more, according to a July survey by Financial Executives International, a trade group for financial executives.

Toledo-based auto parts manufacturer Dana Corp. has hired outside consultants to help, spending more than 100,000 hours on the initiative to date, spokesman Gary Corrigan said.

At Tasty Baking Co., one of hundreds of smaller companies engaged in the effort, employees are making sure that invoices paid by the Philadelphia treat maker match purchase orders or are signed by a manager to attest to their legitimacy. As many as eight employees are dedicated to the control work, and some 20 more occasionally participate.

"We have two local plants, no international translation issues -- we're as simple as it gets from a process standpoint," said Pamela S. Prior, internal control director at the 1,100-employee firm. "And yet here we are. . . . The effort is this significant."

Colleen Sayther Cunningham, president of the financial executives trade group, said some members are fretting about whether auditors have enough resources to do the job, "particularly the smaller companies that have been waiting around since July for the auditors to come around and test, because they're focused on their big clients."

"Accounting firms' resources are so tight right now," said Beresford at the University of Georgia. "They don't even have enough people to service all their clients. They're just going to have to make some choices."

The Washington office of PricewaterhouseCoopers has imported as many as 100 accountants from English-speaking countries such as the United Kingdom and Australia to help with the internal control work. The firm also paid between $45 million and $50 million to put 9,000 U.S. staffers through training on internal controls. KPMG LLP hired 800 more auditors this year to help meet demand and moved up its start date for new hires from September to June.

"This is a permanent change in our business, and we are staffing accordingly," said Timothy P. Flynn, vice chairman for audit and risk advisory services at KPMG.

The Securities and Exchange Commission is taking the effort so seriously that it has called for postponing other key initiatives -- including a controversial plan to treat employee stock options as an expense -- for as long as six months to give companies time to finish their internal control reviews.

"Of all the recent reforms, the internal control requirements have the greatest potential to improve the reliability of financial reporting," said Donald T. Nicolaisen, the SEC's chief accountant, in a speech last month. "It is absolutely critical that we get the internal control requirements right."

Despite urging from parts of the business community, Nicolaisen said in an interview that he does not plan a broad-based reprieve from the deadline. Instead, he said, SEC officials are monitoring the situation closely and "if the concern rises to a critical level" in late November, the agency might consider extending the deadline for "selective pockets" of companies, such as small firms that lack sophisticated in-house resources to get the job done.

Controls are the backbone of a company's financial systems. Through requirements such as special approvals on checks, they help ensure that employees do not siphon money for themselves or collude with suppliers. They also help protect the integrity of financial reporting by requiring workers and executives to follow accounting rules and avoid mistakes in such basic things as how they report revenue.

For decades, companies have been required to have in place sound fiscal controls, but outside accountants often gave control reviews short shrift.

A law passed in the late 1970s in the aftermath of overseas bribery scandals subjected many banks to more rigorous reviews of the sort other companies are now scrambling to implement as a result of the Sarbanes-Oxley Act. The 2002 act, with its broad requirement for a review of financial controls, has helped drive up the cost of corporate audits by as much as 50 percent -- increasing revenue for the accounting industry, which had been soundly criticized for failing to detect some of the biggest frauds of the 1990s.

Accounting experts say faulty controls helped extend, if not give rise to, massive frauds at WorldCom Inc., Rite Aid Corp., and Adelphia Communications Corp. Internal control problems have been cited in 83 percent of the financial fraud enforcement actions the SEC has taken in recent years, according to investor advisory firm Glass, Lewis & Co. LLC.

"One must be concerned about the adequacy and competency of a business organization and their CFO and controller, who 28 years after passage of legislation . . . and 21/2 years after the passage of Sarbanes-Oxley, still can't implement reasonable controls," said Lynn E. Turner, a former SEC official who now works as managing director of research at Glass, Lewis.

Auditors and regulators say they cannot predict how many companies will not finish the internal control work on time or how many will report that auditors uncovered "material weaknesses" in their controls. The estimates range from a few hundred to more than 1,000. In 2003, before the new requirements took hold, 58 companies reported problems with internal controls.

Already this year, a number of companies have hinted at problems. Computer manufacturer Silicon Graphics Inc. said its auditors had turned up "calculation errors" for interest and depreciation costs, and problems with its accounts payable systems. In a recent SEC filing, the company blamed the problems on "substantial" layoffs it made during the technology downturn over the past several years. A company spokeswoman did not return calls.

Advertising giant Interpublic Group said it expected to report control breakdowns at year's end while UTStarcom Inc., which makes and sells telecommunications equipment, said it may not complete the work on time because of problems with the way it records deliveries, according to a Bear, Stearns & Co. report last week.

Research analysts and credit-rating agencies are urging investors to ask executives about their companies' controls in quarterly earnings conference calls. Faulty controls may signal broader financial and management problems, experts said.

William J. McDonough, chairman of the Public Company Accounting Oversight Board, which regulates the audit industry, said in a speech last month that the cost of complying with the rules easily will be recovered if they prevent another major accounting scandal. But some companies are still not convinced that the months of effort have been worth the expense.

"It's still too early to tell," said Intel Corp. spokesman Chuck Mulloy. "We've added the resources we need to comply, and we'll watch and see what the benefits are."