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Internal Controls: A New Enforcement Frontier?

Sauer Rick | February 24, 2004

When crises of corporate conduct reveal widespread shortcomings in public company disclosure, lawmakers and regulators turn to questions of internal controls.

Dissatisfied with the output of corporate reporting, they tinker with its inputs and the processes that connect the one to the other. With the new certification and attestation requirements of the Sarbanes-Oxley Act, this tinkering will likely create a significant growth area in SEC enforcement activity.

The History

Before 1977, no requirement existed that public companies have any internal controls whatsoever.

At that time the scandal de jour was the discovery that U.S. businesses were not above enhancing their competitiveness in overseas markets by paying the occasional bribe to...

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