The five members of the Securities and Exchange Commission voted unanimously to adopt the requirements, ordered by Congress last summer in response to the accounting scandals that rattled public confidence in the stock market and the integrity of corporate America. The rules will take effect for most publicly traded companies in June 2004.

The accounting firm that audits a company's books will have to attest in the annual report that company officials consider the internal controls over financial reporting to be adequate. In addition, company management will have to evaluate and report at the end of each quarter any substantial change in the internal controls.

SEC Chairman William Donaldson said before the vote that the move will hold company executives accountable.

Commissioner Cynthia Glassman said it sends the message, "If you're a senior officer of a public company, then accurate reporting is one of your most important jobs and you shouldn't take it lightly."

Securities attorneys and other experts say that tightened internal controls on financial reporting can deter fraud, but not always.

Commissioner Harvey Goldschmid, calling the new rules long overdue and "very much in the national interest," acknowledged that they "will deter, though not eliminate, management fraud."

On the positive side, he noted, the internal control system at now-bankrupt telecom giant WorldCom worked, detecting $4 billion in questionable accounting last June. The company's internal auditors brought to light the gap in the company's books, now estimated at around $11 billion.

The accounting industry's biggest lobbying group quickly praised the SEC's action, calling it "a giant step toward restoring confidence in the financial reporting process."

"A public company's ability to withstand pressures to provide false or misleading information to the public depends a great deal on the effectiveness of internal controls," said James O'Malley, senior vice president for public affairs at the American Institute of Certified Public Accountants. "Effective internal controls are the best defense against fraudulent reporting."

CEOs and chief financial officers of major corporations already are required to submit sworn statements certifying the accuracy of recent financial reports - an unprecedented move taken last year to help restore investor confidence.

The new rules on internal controls were the latest in a stream of SEC actions putting into effect the sweeping new law to combat corporate fraud enacted last year.