Internal control weaknesses in April highlight leases.
For year-over-year comparison, only 30 companies made similar disclosures in April 2004, which was prior to the effective date of Sarbanes-Oxley Section 404.
As the chart below indicates, the largest number of disclosure weaknesses--22.6 percent--cited lease accounting. By way of comparison, in the previous month (March), leases and loans accounted for less than 10 percent of disclosures.
The lease-related disclosures, Compliance Week noted, "were being made in wake of a letter written by the Securities and Exchange Commission's chief accountant to a professional accounting group. The letter, written itself after a wave of restatements to correct lease-related accounting errors, reiterated the rules."
Also significant 10.75 percent of the disclosures noted staff issues. This is a growing problem (see accounting education article on page 40).
Most Common Internal Control Disclosures in April 2005 Type Percentage Lease Accounting 22.58% Accounting Policies, Practices 18.28% Staff (Inexperienced, Lack of) 10.75% Taxes 8.60% GAAP Calculations, Policies 7.53% Revenue Recognition 5.38% Account Reconciliation 4.30% Segregation of Duties 3.23% IT Environment 3.23% Financial Close Process 2.15% Inventory Issues 2.15% Control Environment 2.15% Documentation 2.15% Monitoring 2.15% Anti-Fraud Controls 1.08% SAS 70 Issues 1.08% Timing (Not Enough Time) 1.08% Uncategorized 1.08% These numbers are based on 93 material weaknesses disclosed in April 2005; some companies disclosed more than one weakness. Source: Compliance Week, May 10, 2005 (reprinted with permission).
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|Author:||Heffes, Ellen M.|
|Date:||Jun 1, 2005|
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