PwC Chief Cites Sarbox 404 Delays

The Big Four firm's CEO says that many companies will fail to comply with the internal-controls provision or will dig up a material weakness large ...
Stephen TaubJanuary 28, 2005

Samuel DiPiazza, the chief executive of PricewaterhouseCoopers, warned that about one in 10 companies will either be unable to meet the deadline for complying with Section 404 of the Sarbanes-Oxley Act or will have discovered weaknesses in their internal controls over financial reporting, according to the Associated Press.

“We expect 10 percent, give or take, of public companies in the U.S. to have to report to their shareholders that they either couldn’t get this done in 18 months, or they had a material weakness of a scale that could cause a misstatement,” said the Big Four executive, speaking at the World Economic Forum annual meeting in Davos, Switzerland.

In 2004, 582 companies disclosed material weaknesses or significant deficiencies in internal controls, according to Compliance Week.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

Further, according to a recent report by Huron Consulting Group, the number of amended filings for financial restatements surged more than 28 percent, to a record 414 in 2004 from 323 a year earlier. The firm cited the impact of Sarbox 404 as one of the most significant factors to affect financial reporting last year.

DiPiazza feels that despite the obvious struggle to comply with Section 404 that many companies have been experiencing, the internal-controls requirement has been a largely positive development, according to the AP. He reportedly believes that some companies have gained insights into their controls they didn’t previously have.

He also told his audience it is likely that regulators will look for ways to improve the law’s provision by making it “less focused on paperwork and more focused on substance,” according to the account.

Late last year, the SEC slightly delayed implementation of the internal-controls rules for certain smaller companies. Earlier this week, SEC Chairman William Donaldson said the commission was considering pushing back the deadline for foreign companies to meet Section 404 requirement.