Following three-plus years of painful adjustments brought about by Sarbanes-Oxley, companies may be finally getting a handle on how to use SOX to their advantage. For the first time in a decade, according to a Glass Lewis & Co. report, there has been a year-over-year decline in the number of restatements filed by public companies. During 2007, companies filed 1,289 financial restatements, down 15% from 2006, when restatements peaked at 1,524. Among companies with at least $75 million in market capitalization, restatements were down 5% to 560.

Restatements spiked in the early years of SOX, partly because SOX forced companies and auditors to re-evaluate accounting policies. "The re-evaluation of risk that occurred during that time necessarily resulted in [more] restatements," says PCAOB board member Charles Niemeier. "Internal controls played a part in that, as a vehicle for risk re-evaluation. As material weaknesses decrease and companies complete SOX 404 implementations, it should lead to fewer restatements."

Despite four years of 404 audits by larger companies, SOX implementations are still far from complete at smaller cap companies, he notes. As a result, "we may see more restatements as implementations take place there," he says.