Upfront: Fraud After Sarbanes-Oxley

There's nothing like a beefy piece of legislation for putting a dent in underdetected and underprosecuted forms of corporate misbehavior. In the four years since passage of the Sarbanes-Oxley Act, companies have instituted a broad variety of anti-fraud programs and internal controls, and the incidence of fraud in the nation's businesses has notably declined.

Yet fraud hasn't gone away, and companies may not be adequately prepared if it rears its costly head in spite of their best efforts at prevention. When Deloitte Financial Advisory Services LLP tallied the numbers from a poll of 500 business leaders, including senior finance executives and controllers, the results showed that 75 percent of companies have anti-fraud programs in place, but only 13 percent have mobilized a regulatory response team.

"The challenge for most companies becomes one of execution," says David Bloch, a principal in Deloitte Financial Advisory Services' forensic and dispute services practice in Washington, D.C. "While positive steps are being taken within corporations, we believe it will be some time before formal response plans become universal." About 60 percent of respondents believe that the number of internal and external accounting investigations will increase during the next two years. Forty-six percent report that their companies have responded to an inquiry from the Department of Justice or the SEC, and only 36 percent indicate that internal investigations of financial statement issues have produced no proof of accounting irregularities.