The report from research firm Glass Lewis & Co. said the findings show the rule - known as Section 404 - is working well in rooting out financial error and fraud and shouldn't be softened as many corporate executives want.

U.S. public companies filed a record 1,420 restatements in 2006, the study said, up from 1,255 a year earlier, with nearly one in 10 companies restating. But among larger companies, restatements fell 14 percent, while the smallest companies - those with a market capitalization of less than $75 million - saw restatements soar 40 percent.

The difference, the report contends, is that bigger companies have had to comply with the new rule since 2005 and have already fixed any problems with their internal controls over financial reporting. As a result, they've made progress in cleaning up their books and completed any restatements that were needed. By contrast, small companies don't yet have to comply with Section 404, and so "these companies still have lots of work left to do" in finding financial-reporting problems, the report said.

Many executives have argued that the internal-control rule should be eased, saying it's too costly and cumbersome and hurts U.S. markets in competition with markets abroad. The Securities and Exchange Commission and the Public Company Accounting Oversight Board have proposed changes that would relax internal-control requirements.

But Glass Lewis said the restatement trends show "the process is working." Without it, the firm said, "we feel certain that investors still would be relying today on false financial reports" at many of the companies that have restated since the rule took effect.