Sarbanes Oxley Effectiveness on the Earning Management

12 Pages Posted: 22 Mar 2011

Date Written: March 5, 2011

Abstract

The study examined the degree to which the enactment of Sarbanes-Oxley Act (SOX), specifically Section 404, has impacted earnings management practices among Fortune 500 companies. Companies practice earnings management to (a) be selective about the information on financial performance investors receive, and (b) hide or misrepresent the corporation’s true earnings. By examining the impact of regulatory intervention, accounting standard-setting organizations will have the opportunity to measure the strength of statutory oversight. Findings suggested that regulatory intervention through the implementation of SOX reduced the practice of earnings management. The findings enabled leadership to better understand the insight and to offer transformation to the companies’ ethical paradigms. As corporate leaders have a fiduciary responsibility to behave ethically and responsibly to provide investors, employees, stakeholders, and the public with the ethically based financial reports.

Keywords: SOX 404, Internal Control, Earning Management

Suggested Citation

Ang, Rachel, Sarbanes Oxley Effectiveness on the Earning Management (March 5, 2011). Available at SSRN: https://ssrn.com/abstract=1791766 or http://dx.doi.org/10.2139/ssrn.1791766

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