Economic Effects of SOX Section 404 Compliance: A Corporate Insider Perspective
56 Pages Posted: 2 Sep 2013 Last revised: 1 May 2014
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Economic Effects of SOX Section 404 Compliance: A Corporate Insider Perspective
Economic Effects of SOX Section 404 Compliance: A Corporate Insider Perspective
Date Written: September 23, 2013
Abstract
We use survey responses from 2,901 corporate insiders to assess the costs and benefits of compliance with Section 404 of the Sarbanes-Oxley Act. The majority of respondents recognize compliance benefits, but they do not perceive these benefits to outweigh the costs, on average. This is particularly true among smaller companies where the start-up costs are proportionately larger. However, the perceived efficiency of compliance increases with auditor attestations, years of compliance experience, and after the remediation of a material weakness. Notably, the perceived effects of compliance depend largely on firm complexity, but are mostly unrelated to firm governance structure.
Keywords: Corporate governance, Internal controls, Regulation, Sarbanes-Oxley, Section 404
JEL Classification: G18, G38, K22, M49
Suggested Citation: Suggested Citation
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