Investors and analysts outside the U.S. are not well informed about Section 404 of the Sarbanes-Oxley Act and are concerned about the potential impact of negative disclosures, according to a new PricewaterhouseCoopers survey of investors and analysts in North America, Europe and Asia who cover U.S.-listed companies. Due in part to widespread publicity, 77 percent of respondents in the U.S. say they know "at least a little" about Section 404. That number falls to about 60 percent in Europe and 40 percent in Japan. The survey, taken in January, is the first to assess how Section 404 is perceived in the global capital markets.
Section 404 requires that the annual reports all SEC-registered companies include a statement by management and the external auditors on the effectiveness of the company's internal controls over financial reporting. The new standard became effective for most public U.S. companies on November 15, 2004 and will extend to smaller U.S. and non-U.S. SEC-listed public companies on July 15, 2006.
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