Public Firms to Supply New Disclosures to Investors

Investors in the nation's publicly traded organizations will soon have access to an unprecedented level of corporate data when corporations problem their annual reports, which, for the initial time ever, will include information about their internal control more than economic reporting and offer a higher degree of transparency.

To assist investors fully understand the new reporting, Deloitte & Touche, Ernst & Young, KPMG and PricewaterhouseCoopers have developed two painless-to-use resource guides.

When an organization measures its internal control over monetary reporting, it monitors the essential processes involved in recording transactions and preparing economic reports. A business now will have to make public its assessment of the effectiveness of its internal handle more than financial reporting, including an explicit statement as to regardless of whether that handle is beneficial and irrespective of whether management has identified any "material weakness."

The company's independent auditor will evaluate management's assessment and express an opinion on that assessment. This info is to appear in corporate annual reports beginning in February 2005.

These new disclosures have been put in spot by the federal government in response to the series of business failures and corporate scandals that started with Enron in 2001. The disclosures are fundamental to investors due to the fact productive internal manage more than monetary reporting helps improve the reliability of financial reports and can be a deterrent to corporate fraud.

To use this material effectively, investors ought to look at that a material weakness in internal manage more than monetary reporting does not imply that a material financial misstatement has occurred or will occur, but that it could take place. It is a warning flag.

A material weakness need to be evaluated in the context of the company's certain predicament, such as consideration of the following locations.


 * Fraud: Does the weakness involve corporate fraud by senior management?


 * Duration: Was the weakness the outcome of a short-term breakdown or a far more systemic trouble?


 * Pervasiveness: Does the weakness relate to matters that may possibly have a pervasive effect on monetary reporting?


 * Relevance: Is the weakness related to a process that is crucial to the business?


 * Investigation: Is the weakness associated to a current regulatory investigation or lawsuit?


 * History: Does the organization have a history of restatements?


 * Management reaction: How has management reacted to the material weakness?


 * Tone at the top rated: Does the weakness represent a concern with the "tone at the best"?

Material weaknesses can happen in any element of the economic reporting approach, and might differ with a company's characteristics, the sector and the home business environment. The new disclosures do not address the soundness of a company's organization approaches or its ability to reach financial objectives. www.s-oxinternalcontrolinfo.com.- NU

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