Despite dire predictions last fall that 20% or more of
companies might flunk the first audits of internal controls under Section 404 of the Sarbanes-Oxley Act, it now appears that only 8% didn't clear the bar. And for the most part, even those that had to admit to material weaknesses in their systems did not find themselves severely punished by equity markets. Yet, the process was hardly painless and companies have been howling for months about the resources needed for the first year of compliance. In 2004, the costs for just the nation's largest companies have been estimated at $1.4 billion.