Audit Integrity tested its flagship Accounting and Governance Risk (AGR) rating, an objective measure of corporate integrity, and found that last year companies whose AGR score placed them in top-rated 10 percent generated average returns that were 22.46 percent higher than the riskiest, bottom 10 percent.

These results are consistent with historical results also released by Audit Integrity, which show an annual 15.29 percent difference between the top and bottom rated companies over the past 10 years. Results were consistent across the full 10-year period, as well as across nearly all industry sectors, implying that integrity ratings are an effective way to manage investment risk throughout the investment cycle.

The analysis of 2008 returns showed the performance of Audit Integrity ratings strengthen as the market volatility worsened. For example, during the months of September, October and November, the worst months of 2008 for the S&P 500 Index, Audit Integrity's ratings were most effective. The AGR rating model was also particularly effective in the financial sector and among bail-out recipients, where AGR identified several quarters in advance many of the companies facing grave losses, including Bear Stearns, Lehman Brothers, General Motors, A.I.G., Merrill Lynch, Bank of America and others.

"Corporate integrity, which we measure by looking at accounting transparency and good governance, is always important. We have found it to be especially meaningful in down or volatile markets, when the risks of "surprises" are greatest," says Jack Zwingli, CEO of Audit Integrity. "Investors need to take a hard look at the underlying credibility of a company and its management. Our research provides this unique layer of scrutiny for investors to use in order to steer clear of the riskiest companies and increase returns by investing with credible companies."

Companies that receive a low AGR rating have a greater potential for experiencing detrimental events such as regulatory actions, shareholder litigation, financial restatements and bankruptcy, all of which can negatively impact a company's stock price.

In a related study on AGR effectiveness, Audit Integrity also released a paper by Walter N. Torous, Finance Professor at the UCLA Anderson School of Management. The study, underwritten by Audit Integrity, compared AGR with other traditional investment factors and found AGR to provide a unique measure of risk. The implication is that integrity risk is not being accounted for by investors.

"After controlling for traditional investment factors such as market risk, company size, company valuation, momentum and liquidity, I found that the AGR score has incremental power to explain excess stock returns," says Professor Torous. "The AGR rating explains an aspect of the risk-return tradeoff prevailing in equity markets not associated with any previously documented risk factor."

These results come on the heels of an independent report last week noting that Audit Integrity ranked in the top 3 of firms measured by Investars in providing the most effective stock ratings.

In addition to its ratings on nearly every publicly traded U.S. corporations, Audit Integrity regularly issues "Investor Watch List," to help investors detect companies likely to experience negative events resulting in losses to shareholder's equity. The full list is available at www.AuditIntegrity.com, as are free individual company ratings.

"Anyone not including an integrity risk factor into their investment decisions is very likely to continue to be surprised and disappointed," says Zwingli. "Integrity risk is real, it has a substantial impact on returns, and it can be effectively put to use by all types of investors."