2004 earnings may be revised downward to 25-27 cents/share, with net income down to $9.0 to $9.6 million.

It is a terrible pity that investors have to contend with the additional risk that companies may make accounting errors, but that's a part of the current investing climate until corporate governance legislation is more strictly and widely enforced. The only way to deal with this kind of risk at present is to use stop losses. 

It seems that SYX were not obliged to comply with Section 404 of the Sarbanes-Oxley Act. The Sarbanes-Oxley Act came into force in July 2002 and introduced major changes to the regulation of corporate governance and financial practice. It is named after Senator Paul Sarbanes and Representative Michael Oxley, who were its main architects, and it set a number of non-negotiable deadlines for compliance.

Section 404 is listed under Title IV of the act (Enhanced Financial Disclosures), and pertains to 'Management Assessment of Internal Controls'.

Summary of Section 404

Issuers are required to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures.

The registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting.

We'll have to wait and see what the revised financial statements are before we know if SYX will drop off our screen.

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