Companies need to be prepared for how they will tell investors about internal control weaknesses uncovered by ongoing reviews mandated by Sarbanes-Oxley, said William McDonough, chairman of the Public Company Accounting Oversight Board (PCAOB).
Investors.com reported on a speech McDonough gave last week to the Securities Industry Association. The PCAOB was created by the Sarbanes-Oxley Act of 2002, passed to reform corporate governance in the wake of numerous accounting scandals.
The board audits company auditors to make certain financial information is accurately represented and investors get a clear picture of a given company, Investors.com reported.
"Some companies are doing the right thing and some business groups are saying the right thing," McDonough said. But he added that "vastly more needs to be done, and soon."
A former president of the New York Federal Reserve Bank, McDonough began his speech by saying "potential accounting abuses at public companies are still a threat to public trust."
Nov. 15 marks the deadline for meeting financial reporting requirements required under Sarbanes, and McDonough said companies need to be prepared to report bad news as well as good news.
McDonough noted the trouble some companies have been having in meeting the rigorous requirements set forth by Sarbanes and said he can safely predict that some of them won't meet the deadline.
"I am encouraging executives to begin considering now their responses to deficiencies within their companies' internal controls -- not just in making plans to correct those deficiencies, but in deciding how to communicate those corrections to investors and the larger public that relies on transparency in our markets," he said.