A study by Deloitte & Touche and a law firm has found that companies who have reported internal control weaknesses related to financial reporting have not been disproportionately hit with securities litigation. WebCPA has an article on the study, which found that only 6 percent of the nearly 300 companies analyzed were served with a class action securities complaint related to the disclosed deficiencies. It is not clear from the article, however, whether the study considered the impact of stock price movements related to the disclosures. The release of the study comes as companies prepare to meet the internal control disclosure deadlines of Sarbanes-Oxley Section 404.
Quote of note: “The disclosures in the study ranged from simple and significant deficiencies, to reportable conditions and material weaknesses. Material weaknesses represented 52 percent of the disclosures.”