The number of companies reporting material weaknesses under Section 404 of Sarbanes-Oxley has dropped steadily since the first year of compliance in 2004, suggesting that accelerated filers have made improvements in their internal controls, according to a Securities and Exchange Commission staff member.
Among roughly 3,800 companies that filed reports in accordance with Section 404 through July 31, only 285—or 7.5 percent—reported material weaknesses. That’s down from 10.7 percent in Year Two and 16.3 percent in Year One, when 3,900 companies filed 404 reports.
