Benefits and costs of Sarbanes-Oxley Section 404(b) exemption: Evidence from small firms' internal control disclosures

• 成果类型: Article
• 署名作者: Ge, Weili; Koester, Allison; McVay, Sarah
• 署名单位: University of Washington; University of Washington Seattle; Georgetown University
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2017.01.001
• 发表日期: 2017
• 关键词: control deficiencies; Managerial ability; SOX; QUALITY; CONSEQUENCES; determinants; weaknesses; earnings

摘要

We quantify measurable benefits and costs of exempting firms from auditor oversight of internal control effectiveness disclosures. We measure the benefit of exemption as an aggregate $388 million in audit fee savings from 2007-2014. The costs stem from internal control misreporting: an aggregate $719 million of lower operating performance due to non-remediation and a $935 million delay in aggregate market value decline due to the failure to disclose ineffective internal controls. The audit fee savings benefit shareholders of all exempt firms, whereas the costs are borne by shareholders of only a fraction of exempt firms (the internal control misreporters). (C) 2017 Elsevier B.V. All rights reserved.