The number of material weaknesses large companies are reporting has plunged in the last two years, according to an exclusive Compliance Week analysis—further evidence that Section 404 of Sarbanes-Oxley, as onerous as it is, has compelled a dramatic improvement in companies’ internal control over financial reporting.
Compliance Week reviewed the internal control disclosures made last year by more than 400 companies in the S&P 500. Of that group, only 11 companies disclosed a total of 14 material weaknesses. By comparison, hundreds of companies disclosed nearly 900 material weaknesses in a similar Compliance Week study done in 2006.
