Sarbanes legislation exposes defects

Businesses from MCI to Kodak said they have discovered such weaknesses in their operations. In addition, thousands of problems not serious enough to be called "material" were found and fixed.

"There's no question investors now have a better flavor for those companies (that) have a high risk with their financial reporting because of a lack of controls," Lynn Turner, managing director of research at proxy adviser Glass, Lewis & Co., said. Turner, a former chief accountant at the Securities and Exchange Commission, made his comment last month at a daylong SEC roundtable discussion on requirements under Section 404 of Sarbanes Oxley.

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