The debate rages over the effectiveness of Sarbanes-Oxley and the impact it has on the corporate strategy of multinational organisations worldwide, as well as on transatlantic trade, listings and merger activity. However, at the risk of upsetting FDs and their staff, whose companies have a US listing or who work for subsidiaries of US-quoted companies - all of whom are doubtless struggling to comply and spending millions in the process - Sarbanes-Oxley seems to be working.

While the entire burden of Sarbanes-Oxley has fallen on preparers of accounts, the intended beneficiaries are the shareholders who should be able to place greater reliance on the financial information presented to them. According to evidence obtained from Parson Consulting, a US financial management consultancy, the percentage of companies in the Standard & Poor's 500 stock index that missed analysts' earnings per share projections fell to just under 30% in third-quarter 2004, an 18-month low.

Parson claims this is due to the Securities and Exchange Commission's accelerated reporting deadlines. These regulations shortened the timeframe in which companies report quarterly and annual earnings, while at the same time requiring greater transparency and accuracy of financial information. But it seems illogical to suggest that doing something faster means you necessarily will do it better. Why, then, would forcing FDs to do more in less time produce better results?

Sarbanes-Oxley has forced companies to examine their reporting systems in a critical fashion in a way they had not done for many years. The result of this has been to lead global companies to streamline their processes and employ more sophisticated financial systems that improve the accuracy of forecasts and projections that were given to the market and help in producing figures faster.

Parson claims that one reason why a sizeable number of earnings misses occur is because finance functions were trying to work with outdated or non-comprehensive financial management infrastructures that don't allow companies to provide accurate, timely information.

Talking to FDs and their staff across many different companies, it is apparent that many of the accounting systems in use are poor. To anyone who doesn't work in a finance function of large corporates, it is always difficult to believe that the accounting systems aren't near perfect.

The truth is that the technology-based accounting systems have consistently promised more to companies than they have actually delivered. The result is that everyone - boards, FDs, auditors - has been pretending the world is not actually as it is. It is a form of reality gap.

For more than three decades, organisations have grappled with the challenges of management reporting using information technology. Yet, to this day, there are few corporations that can honestly say they have the problem resolved. Then came Sarbanes-Oxley.

When Sarbanes-Oxley first became an issue in late 2002, it became clear that shorter company reporting times were being seen by the US market as indicators of well-run organisations, and such companies were rewarded with higher price/earnings ratios. The key driver of the changes ushered in by Sarbanes-Oxley was an attempt to restore confidence in the capital markets.

At the foundation of this desire was the need for accurate and transparent financial information. The many scandals suggested there was a deeper malaise with reporting systems. Companies should have put more effort into their accounting systems than they have done in the past, and this is now starting to happen.

The only question is whether the apparent improvement for the US market means the financial and reporting systems of European concerns are improving in a similar fashion. FDs on this side of the Atlantic need no reminding that they have been working to implement international financial reporting standards. That has meant a substantial overhaul of reporting systems. But it does not mean that the money spent in the course of getting ready for IFRS has improved the accuracy of the numbers.

If the accounting systems of major global concerns had produced more accurate results in the first place, then companies may have avoided some of the excessive regulation under which they are now labouring. If Sarbanes-Oxley is moving financial reporting systems towards the respectable status, then in one respect at least it will have done a good job.