Should smaller companies be spared from some of the more burdensome requirements of the Sarbanes-Oxley Act? Many Twin Cities business leaders say yes. But a new study of financial restatements by public companies gives some reasons why that might not be a good idea.
Congress passed Sarbanes-Oxley in mid-2002, in the wake of the Enron and WorldCom debacles, to prevent accounting abuses.
Glass, Lewis & Co., a San Francisco-based independent research firm that advises institutional investors, released the study early this month.
Historically, most of the restatement problems have occurred at the smaller companies, the firm's study says.
"The need for effective internal controls at small companies cannot be overstated," Glass Lewis says in the report. "In effect, small companies often grow faster than their internal control systems are able to handle. So we end up with large companies that have material weaknesses in their controls."
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