NEW YORK (CNN/Money) -
A new rule meant to ease worries about the accuracy of corporate accounting cleared an important hurdle Thursday after only a handful of companies dropped financial bombshells.
But focus now shifts to the firms that in the weeks ahead must swear by the accuracy of their statements.
The CEOs of Sun Microsystems (SUNW: Research, Estimates), Hewlett-Packard (HWP: Research, Estimates) and Microsoft (MSFT: Research, Estimates) are all required to sign off on their financials by September.
They're among 947 large firms that the Securities and Exchange Commission, trying to restore investor confidence, ordered to attest that their books are in order.
With the deadline for some 700 of those companies nearly 24 hours old, not all firms came through. Shares of McLeodUSA (MCLD: Research, Estimates) slipped as much as 8 percent Thursday after the telecommunications company said it could not stand by its 2001 financial information. In restating results, McLeod joins Household International (HI: Research, Estimates), a credit card finance company that cut profit going back to 1994, and Nicor (GAS: Research, Estimates), an energy company that missed the deadline.
AOL Time Warner (AOL: Research, Estimates), the media company that runs CNN/Money, and drugmaker Bristol-Myers Squibb (BMY: Research, Estimates) said they may have overstated results.
Of the firms whose CEOs and CFOs had to pledge on Wednesday under the SEC order, at least 26 failed to certify fully or asked for postponements, according to a Reuters analysis of SEC filings and company documents. Another 10 companies disputed the SEC's Aug. 14 deadline, saying their reporting calendar allowed them to certify their results later this year.
But the vast majority of companies have fully stood behind their numbers, helping boost stocks Wednesday amid a months-long market decline partially linked to the collapse of Enron and WorldCom.
"There were no major surprises," John Pickett of LaBranche and Co. told CNNfn's Market Call.
At the SEC, workers are busy updating the agency's Web site with the companies whose CEOs met the deadline for signing off on their financial statements.
"For the companies that have always been careful, this is not a big deal to them," said Amar Budarapu, chairman of the U.S. securities practice at Baker & McKenzie.
Still, Budarapu said he expects more restatements in the days ahead as companies that missed Wednesday's deadline uncover problems.
A day after the deadline, the SEC Web site showed that about 97 of the roughly 700 firms required to sign off had not yet done so.
But SEC spokesman John Heine said its Web site will "as soon as possible" reflect the entire number of companies whose CEOs actually met the deadline for certifying their financial results.
Any company that missed Wednesday's 5:30 p.m. ET deadline for swearing by the accuracy of its books can get a five-day extension. That deadline is Thursday. But the SEC could not say how many companies have asked for the extension, referring questions about individual companies to its EDGAR database, a Web site for reviewing filings.
Companies revealing accounting scandals have taken major market hits. Enron's disclosure, announced last year, and WorldCom's bombshell, dropped in June, reduced once-lofty shares to penny stocks. Both companies filled for bankruptcy protection.
But the punitive consequences of not complying with the new SEC rule remain unknown.
Heine, the SEC spokesman, said that when terms of the agreement have not been met, either because of deadlines or misstatements, "the SEC will consider all options available for fashioning an appropriate remedy."
The regulatory organization can impose fines on companies and can also bring civil charges.
For its part, the White House called the new rule "an important step toward accountability," Reuters reported.
Some analysts agree, saying the extra layer of accountability will ease investor mistrust and flush out book cooking. Others call the measure cosmetic, saying the market won't recover without strengthening profits and a lot of time.
Bill LaRocque, the lawyer who filled shareholder lawsuits against Enron and WorldCom, says the requirement won't keep dishonest CEOs from trying to hide fraud.
"They are going to cross their fingers, sign and pray for the best," LaRocque said.
But Pamela Stumpp, managing director and chief credit officer at Moody's Investors Service, said failure to comply with the order will send a negative message to the market.
'We are watching these developments very carefully," Stumpp said.
Enron, whose collapse set off the wave of mistrust in accounting, certified its results since last December, but with qualifications, and said it could not certify earlier results.
Qwest Communications (Q: Research, Estimates), a local phone carrier, and bankrupt cable company Adelphia Communications said they could not sign off on their results. Federal regulators are looking into accounting practices at both companies.
The whole process may not end until Dec. 27. That's when the last of the 947 companies are required to certify their financials.