"This research provides helpful insight into best practices for Sarbanes-Oxley and we are excited to publish this," said Colleen Cunningham, President and CEO of FEI and FERF. "With the bulk of Section 404 implementation in place at many companies, we believe this is an important time to assess the progress made, and to look ahead at helpful business lessons we can apply to the future. The report identifies best practices for companies in 2006 and beyond."

"Sarbanes-Oxley Section 404 Compliance - From Project to Sustainability" summarizes the compliance practices of leading companies and describes how they are improving their processes in the second year of compliance as they strive toward long-term sustainability. FERF produced this report with Dr. Robert A. Howell, Distinguished Visiting Professor of Business Administration at Dartmouth's Tuck School of Business.

The report is the result of Section 404 implementation leaders from some of the nation's largest companies gathering to share their experiences with Section 404. This discussion, arranged by FEI, found that most participants agreed the time and expense of compliance was not sustainable, and that they would have to look for and implement process improvements.

  The report describes some of those process improvements, which include:

• Use a top-down approach to risk and planning;
• Take a risk-based approach to testing;
• Use software to automate documentation, controls, and testing; and
• Work towards a greater reliance on management's testing by the external auditor.

Management's Report on Internal Controls

Also released by FERF, Management's Reports on Internal Controls analyzes these disclosures and related auditors' findings filed in Securities and Exchange Commission Forms 10-K and 10-K/A to identify common formats and inclusion of all required statements. A collaborative effort by FERF and Mark P. Holtzman, Assistant Professor of Accounting at Seton Hall University, the report found that:

• All used the framework developed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
• Control evaluations and management's report on internal control over financial reporting are typically located in Item 9a of the 10-K, with some reports located in Item 8 or 15.
• All reports included the four basic requirements per the SEC Rule. Virtually all followed the sequence of statements suggested in the rule, which was to include statements regarding management's responsibility, the framework used, management's assessment, and the accounting firm attestation.
• The majority of companies had two audit reports from their accounting firms, one for the financial statement audit and one for the internal control. Most were found in Item 8 or 15 of the 10-K. Almost all of the companies with a single audit report were audited by PricewaterhouseCoopers.
• Considerable variation was found in management's reports that noted their companies have effective internal controls over financial reporting. Many reports reviewed and emphasized companies' strong control systems, highlighting elements such as ethics committees and anonymous hotlines.
• A number of companies took advantage of the SEC exclusion for control assessments for new acquisitions.
• Material weaknesses related to income tax and lease accounting were the types most frequently cited by companies that disclosed material weaknesses.

As a public service, FERF has made Section 404 Compliance - From Project to Sustainability available free of charge. Management's Reports on Internal Controls is available to FEI members at no charge and is $49.95 for non-members.

The reports can be found at: http://www.fei.org/rfbookstore