US companies face internal control rules
Following on from the oaths of accounting honesty set out in the controversial Sarbanes-Oxley Act, US public companies may soon be forced attest to the vigorousness of their internal controls.
The new rule, which the Securities & Exchange Commission is voting on today, will require company executives to show what internal controls they have in place in their annual reports and what they are doing to prevent fraud, according to the Washington Post.
This follows internal controls being blamed for accounting frauds at WorldCom and Rite Aid Corporation.
New chief auditor Douglas Carmichael said internal controls could be a significant deterrent to management fraud, although he admitted that they were not a foolproof solution.
The planned rule, the details of which are not yet known, has been praised by the American Institute of Certified Public Accountants, while most experts agree it is a positive step.