Risk & Compliance

Five Dozen Companies Seek Filing Delay

Many cited issues related to documenting their internal controls as required by Section 404 of the Sarbanes-Oxley Act.
Stephen TaubMarch 21, 2005

At least 60 companies last week sought an extra 15 days to file their 2004 annual reports, which were due on March 17, according to a CFO.com search of press releases and other public reports.

Many of these companies cited issues related to documenting their internal controls as required by Section 404 of the Sarbanes-Oxley Act. Late last year the Securities and Exchange Commission gave most smaller companies an extra 45 days to comply with 404, but the extra time applied only to that section of Sarbox.

Of course, some of the companies that asked for an extension are already embroiled in high-profile scandals or other difficulties; they include American International Group, Fannie Mae, HealthSouth, and Hollinger. Others, including BearingPoint and Terex Corp., recently announced that they would restate prior results because of accounting problems.

Take Terex. The world’s third-largest maker of construction equipment stated that it needs more time to complete a previously announced internal accounting review. The company plans to restate results from 2000 through 2003 due to intercompany transactions.

Companies that cited Section 404 as a reason for their delay included EDS, Veritas Software, Impax Laboratories, and Audible Inc.

“This issue with internal control is impacting a lot of companies,” Susquehanna Financial Group analyst Kaushik Roy told Reuters. At Veritas, which is in the process of being acquired by Symantec, he added that “the bigger issue is people are leaving Veritas and there is increasing competition from EMC.”

Audible Inc. — which has a market capitalization under $300 million and therefore had been entitled to the earlier 45-day extension — also stated that one reason for its filing delay was its discovery of material weaknesses in its internal controls. “We have fixed this problem and intend to issue an update on our efforts to tighten our internal control processes when we report our first-quarter results,” said chief executive officer Donald Katz, in a statement.