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Article
Publication date: 1 August 2005

David O. Stephens

The purpose of this article is to examine the potential of The SarbanesOxley Act on financial accounting systems in publicly‐held companies.

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10765

Abstract

Purpose

The purpose of this article is to examine the potential of The SarbanesOxley Act on financial accounting systems in publicly‐held companies.

Design/methodology/approach

This article examines the Public Company Accounting Reform and Investor Protection Act 2002, commonly referred to as The SarbanesOxley Act, enacted by the US Congress in the wake of a series of business scandals in the USA. The focus is on the records management implications of the act.

Findings

The SarbanesOxley clearly has the potential to elevate the records management function to a new and higher level than it has ever enjoyed in the life of US business corporations. Future developments must be watched to see whether this proves to be the case.

Originality/value

This article will be helpful to those with more than just a passing interest in the significant happenings affecting records management in the USA.

Details

Records Management Journal, vol. 15 no. 2
Type: Research Article
ISSN: 0956-5698

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Article
Publication date: 12 April 2011

James A. Millar and B. Wade Bowen

As a result of scandals concerning major financial crime in the early twenty‐first century, including accounting and auditing fraud and inappropriate behavior by directors

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2052

Abstract

Purpose

As a result of scandals concerning major financial crime in the early twenty‐first century, including accounting and auditing fraud and inappropriate behavior by directors on the boards of US corporations, Congress hurriedly enacted the SarbanesOxley Act (SOX) in 2002. SOX's major purpose was to restore investor confidence in America's securities markets. Small firms argued that their cost of compliance was very heavy and that their burden was greater than for larger firms, especially the costs related to section 404 of the Act, which dealt with new requirements to obtain independent audit opinions. The authors found no empirical research that supports or denies these claims. Subsequently, in 2007, the Securities and Exchange Commission reduced the Act's new audit requirements for small companies. This paper aims to examine audit fees for large and small firms.

Design/methodology/approach

The study examines actual audit fee data to investigate the increased costs paid by publicly traded companies to independent audit firms for their services due to SarbanesOxley. The authors use univariate and multivariate statistical methods to compare increases in audit fees paid by samples of 150 large firms and 150 small firms.

Findings

The study finds that both small and large firms incurred increased audit fees due to compliance with SarbanesOxley, and that small companies did incur larger increases in their cost burden.

Originality/value

The study uses actual audit fee data reported to the Securities and Exchange Commission and controls for other factors that determine audit fees in reaching its conclusions.

Details

Corporate Governance: The international journal of business in society, vol. 11 no. 2
Type: Research Article
ISSN: 1472-0701

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Abstract

This chapter explores the advantages (for large investors) of directly owning productive assets, compared with indirect ownership through stock in corporations. Significant factors are agency costs and recent changes in the tax and regulatory environment. Recent corporate scandals have led to legislative and regulatory responses that significantly increase the monitoring costs and other burdens of becoming or remaining a public corporation. As a result, there has been a substantial increase in going-private transactions, particularly among smaller public companies. Acquisitions and minority equity positions that allow large corporations to join with smaller companies have also increased. The pressures to go private are not entirely new, however. This chapter, reflecting collaboration by professors of finance and business law, traces the legal concept that the corporation is an entity separate and apart from its owners, showing how the legal status of corporations hinders resolution of conflicts among the parties to the enterprise. Thus, there have long been fundamental flaws inherent in the corporation as the form of organization for certain activities. The current wave of SarbanesOxley restructuring via private equity firms is part of a significant increase in direct ownership of major assets by institutional investors. Direct ownership prevents management expropriation of resources, and is preferable to corporate ownership whenever other alternatives for indemnification or liability limitation are available (such as insurance, limited partnerships, limited liability companies, etc.). Finally, the renewal of direct ownership is not a radical shift, but a return to long-established tradition in the organization of business activities.

Details

Research in Finance
Type: Book
ISBN: 978-1-78190-759-7

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Article
Publication date: 28 October 2007

Hassan R. HassabElnaby, Amal Said and Glenn Wolfe

In this study we examine the oversight responsibilities of audit committees in the post SarbanesOxley Act of 2002 (SOX) era. The results show that audit committee…

Abstract

In this study we examine the oversight responsibilities of audit committees in the post SarbanesOxley Act of 2002 (SOX) era. The results show that audit committee oversight responsibilities assigned and disclosed in proxy statements expanded post‐SOX compared to pre‐SOX. We design a survey instrument to measure the difference between the perceived oversight responsibilities of audit committee members and the oversight responsibilities actually assigned in the proxy. Our results indicate that although audit committees made a substantial commitment to increase their assigned responsibilities over the period of 2001 to 2004, they still need to do more to meet the many additional challenges facing them in a post‐SOX environment. Overall, our results suggest that the intent of SOX‐for audit committees to be more involved and active in the oversight role of an organization‐is becoming institutionalized. These results should be interesting to policy makers, a variety of interest groups, and accounting researchers.

Details

American Journal of Business, vol. 22 no. 2
Type: Research Article
ISSN: 1935-5181

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Article
Publication date: 19 July 2009

Sharad Asthana, Steven Balsam and Sungsoo Kim

The purpose of this paper is to examine the effect of the Enron scandal, Arthur Andersen's demise and the SarbanesOxley Act on audit fees.

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5020

Abstract

Purpose

The purpose of this paper is to examine the effect of the Enron scandal, Arthur Andersen's demise and the SarbanesOxley Act on audit fees.

Design/methodology/approach

The paper uses empirical methodology (univariate and multivariate).

Findings

Audit fees and the Big‐4 premium increased in 2002. Increase was larger for bigger and riskier clients. Evidence is also consistent with a competitive market for former Andersen clients.

Research limitations/implications

Data requirements might bias the sample towards larger sized firms. Data availability limits the number of observations.

Practical implications

The research findings on audit fees in post‐Enron and Arthur Andersen period reported in this paper are important for policy makers.

Originality/value

It is found that the premium charged by Big 4 over non‐Big 4 has increased in 2002, and that the ability of an auditor to charge a premium is adversely affected when its reputation is tarnished. It is also reported that the frequency of voluntary switches within the Big 4 is lowest in 19 years. The audit fee model was also refined by adding two ownership variables to control for agency aspect of client firms; inside and institutional ownership.

Details

Accounting Research Journal, vol. 22 no. 1
Type: Research Article
ISSN: 1030-9616

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Article
Publication date: 24 July 2007

Andrew Kakabadse

The purpose of this paper is to capture a practitioner's view of board performance of US companies, especially under conditions of role duality. The paper also aims to…

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342

Abstract

Purpose

The purpose of this paper is to capture a practitioner's view of board performance of US companies, especially under conditions of role duality. The paper also aims to ascertain the effects of USA governance regulation on US and international corporations.

Design/methodology/approach

A qualitative interview case study.

Findings

Sarbanes Oxley is unlikely to be repealed. Role duality is likely to continue. Emphasis is on ethical behaviour rather than structural board design in terms of determining the nature of high performing boards.

Research limitations/implications

A single interview needs empirical study to test the findings.

Practical implications

A clear outline of the key issues and challenges forcing USA board directors. The findings from the interview will benefit practitioners.

Originality/value

This paper is totally original.

Details

Journal of Management Development, vol. 26 no. 7
Type: Research Article
ISSN: 0262-1711

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Book part
Publication date: 1 January 2005

John W. Kensinger and Stephen L. Poe

This paper explores the advantages (for large investors) of directly owning productive assets, compared with indirect ownership through stock in corporations. Significant…

Abstract

This paper explores the advantages (for large investors) of directly owning productive assets, compared with indirect ownership through stock in corporations. Significant factors are agency costs and recent changes in the tax and regulatory environment. Recent corporate scandals have led to legislative and regulatory responses that significantly increase the monitoring costs and other burdens of becoming or remaining a public corporation. As a result, there has been a substantial increase in going-private transactions, particularly among smaller public companies. However, the pressures to go private are not entirely new. We trace the legal concept that the corporation is an entity separate and apart from its owners, showing how the legal status of corporations hinders resolution of conflicts among the parties to the enterprise. Thus, there have long been fundamental flaws inherent in the corporation as the form of organization for certain activities. Direct ownership of major assets by investors prevents future expropriation of resources, and is preferable to corporate ownership whenever other alternatives for indemnification or liability limitation are available (such as insurance, limited partnerships, limited liability companies, etc.). Finally, the renewal of direct ownership is not a radical shift, but a return to long-established tradition in the organization of business activities.

Details

Research in Finance
Type: Book
ISBN: 978-0-76231-277-1

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Article
Publication date: 16 October 2007

Themistokles Lazarides

The goal of the paper is to detect any gaps in the legislator's and practitioner's approaches in information systems design and implementation and to evaluate their impact…

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1519

Abstract

Purpose

The goal of the paper is to detect any gaps in the legislator's and practitioner's approaches in information systems design and implementation and to evaluate their impact on an organizational and managerial level.

Design/methodology/approach

Basic information system requirements are presented for compliance with the SarbanesOxley Act. These requirements are compared with the provisions made by the vendors (like SAP, Microsoft, etc.) to address the issues raised by the legislators and the OECD's corporate governance principles and guidelines to provide a holistic approach to the problem of corporate governance system alignment.

Findings

The questions raised by the author are: did the legislators encapsulate the real essence of the OECD principles and did the ES designers manage to fully cover the letter and the spirit of the law or find a legalist‐normative solution to the problem of compliance (not alignment) with the laws and principles leading to a deviation from the original principles? It is shown that the latter is the case in a number of systems or modules designed to address the issue.

Practical implications

Practitioners, academics and developers‐vendors may alter their perspective of how an information system is placed within the context of the firm.

Originality/value

A new approach in designing information systems is needed in order to comply with the new legal‐regulatory framework and market needs.

Details

Information Management & Computer Security, vol. 15 no. 5
Type: Research Article
ISSN: 0968-5227

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Article
Publication date: 13 February 2007

Nada K. Kakabadse and Andrew P. Kakabadse

This paper aims to undertake a study of national configurational demographics in order to determine the spread of understanding of the chairman's role, performance and…

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2138

Abstract

Purpose

This paper aims to undertake a study of national configurational demographics in order to determine the spread of understanding of the chairman's role, performance and contribution.

Design/methodology/approach

Qualitative methodology, exploratory in nature through in‐depth interviews and workshop discussion involving 103 UK, US and Australian participants, was undertaken.

Findings

The role of chairman is considered as having a distinct effect on board dynamics, role and contribution and the monitoring and support of management. Nine demographic factors are identified as affecting the manner in which the role of chairman is exercised in the UK, USA and Australia.

Research limitations/implications

The findings of this qualitative exploratory study need to be integrated into a quantitative empirical survey in order to ascertain the validity of the results to date.

Practical implications

The two key conclusions highlight the requirement for governance due diligence, examining the financial and competitive strength of the organisation as well as uncovering contextual sensitivities.

Originality/value

Insufficient attention has been given to the role of chairman. The study offers additional insight on how demographic factors influence the shaping and determination of the role of chairman. This paper should be of interest to practitioners, consultants, line managers, board members, chairmen, management academics and business studies students.

Details

Journal of Management Development, vol. 26 no. 2
Type: Research Article
ISSN: 0262-1711

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Article
Publication date: 1 December 2005

Ho Young Lee

To examine whether or not new auditors of former Andersen clients perceive prohibited non‐audit services from Andersen as a business risk indicator and, therefore, adjust…

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2330

Abstract

Purpose

To examine whether or not new auditors of former Andersen clients perceive prohibited non‐audit services from Andersen as a business risk indicator and, therefore, adjust for the effects of this important risk factor in their audit pricing.

Design/methodology/approach

Utilizing a significant number of involuntary auditor switches in the US as a result of the collapse of Andersen in late 2002, this study uses regression analyses to examine the hypothesized associations between two types of non‐audit services and successor auditors' audit pricing.

Findings

This study finds that the provision of financial information systems (FIS) design and implementation services and internal audit outsourcing services are positively associated with audit fees charged by successor auditors. This study supports the recent prohibition on the provision of FIS and internal audit services mandated by the SarbanesOxley Act of 2002.

Originality/value

This study adds to the recent body of work on the association between the provision of certain non‐audit services and the predecessor auditor independence or audit quality perceived by the successor auditor and provides valuable information for policy makers.

Details

Managerial Auditing Journal, vol. 20 no. 9
Type: Research Article
ISSN: 0268-6902

Keywords

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