Although the SEC has rejected the idea of exempting small companies from Sarbox, the Commission has indicated (during and after its roundtable in May) that it is willing to compromise.

While that may help satisfy critics, Karolyi worries that they will push for more. "The integrity of the law and what it represents could be why we see 30 percent valuation premiums in the U.S. markets," he says. "If we dilute the standards, that value may dissipate."

Kate O'Sullivan is staff writer at CFO.

A Bunch of Bad Apples

While beleaguered finance executives often point to Enron and WorldCom as the source of all their Sarbanes-Oxley woes, at least a hint of trouble, in the form of material weaknesses, has turned up at hundreds of companies in the second and third years of Section 404 compliance. — K.O'S.

Frustrated Expectations

The costs of complying with Section 404 have not declined as markedly as many finance executives expected. Auditor-attestation fees, for example, which were expected to drop by 26 percent in the second year after 404 took effect, fell by just half that amount, according to a study by Financial Executives International. — K.O'S.

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