The glass is half full, but that's debatable*.

Sarbanes-Oxley Section 404 requires public companies to attest to the effectiveness of their internal controls over financial reporting.

As we await the first 404 reports, the debate has heated up a notch about whether these reports will have any impact on the level of confidence investors have in the financial reporting from public companies.

Possibly the greatest concern about Section 404 coming from those deep in the compliance process is the cost of the work in both time and money. Many companies are looking at this cost and are candidly questioning whether there's a corresponding benefit.

And that really cuts to the core of the 404 debate: will all this be worth the effort? Part of the answer will come when the reports are released and investors respond. Will they see value in this new information? Will these reports help rebuild investor confidence?

We are hopeful that investors will spend the time to understand the relevance and benefits of these reports. We have attempted in past communications to frame how this information may contribute to better decisions. In addition, the Big 4 firms have co-authored two investor guides to 404 that help explain what much of this means. (Both investor guides can be accessed at www.s-oxinternalcontrolinfo.com)

Two things that investors should take great comfort in are the significant attention and effort being given to internal controls by companies and auditors.

Never across corporate America has there been such an intense focus on examining whether the appropriate internal controls over financial reporting are in place and are functioning. 404 is an opportunity for a company to document and test its internal controls over financial reporting before problems happen. This is the chance to find weaknesses and correct them. Our experience in the marketplace is that this is happening. Many issues have been identified and have been or will be remediated.

This should be good news to investors and corporate management. CEOs and CFOs are now living in a world where they have new responsibilities for financial reporting. One CEO recently framed the situation in purely human terms: "This is the legislation that will let me sleep better at night."

But maybe a good night's sleep should cost less. And this is an issue that certainly can be explored in the coming months. What enhancements can be made to the 404 standard? What efficiencies can be gained?

An immediate and robust post-mortem on this first 404 effort by all those involved in the financial reporting process can answer some of the questions as well as identify best practices. But to see the real impact of 404--improved investor confidence evidenced by a better capital allocation process--will take more than a few months.

In reality, it is too soon to decide whether the glass is half full or half empty. 404 simply needs time to work. We are confident that as 404 costs come down; as regulators, auditors, and companies refine and improve the process; as investors begin to digest this new perspective and assess its value, the water level will surely rise.

To find out more, visit pwc.com/newrealities

*connectedthinking

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