Sarbanes-Oxley and the Culmination of Internal Control Development: A Study of Reactive Evolution
Dr. Jan R. Heier
Auburn Montgomery - Department of Accounting and Finance
Michael T. Dugan
University of Alabama
David L. Sayers
Auburn University - Department of Accounting and Finance
American Accounting Association 2004 Mid-Atlantic Region Meeting Paper
In an effort to mute criticisms over the lack of oversight by the government, the Congress passed a sweeping regulatory reform act that became known as Sarbanes-Oxley Act of 2002. It was hoped that such an act would also calm the fears of investors in a run-away bear-market and bring confidence back to corporate financial reporting. The results of the act will be studied for many years, but it is fairly clear that it may well be the culmination of a century of development of internal control definitions, applications and procedures by both private and public governmental entities. For example, the American Institute of CPAs, between 1947 and 2001, issued no less than a dozen audit standards on the issues related to internal controls, fraud recognition and prevention. Sarbanes-Oxley caps this process of internal control development through its requirement that internal controls must be reviewed and reported on in the annual report. Finally, as Sarbanes-Oxley itself shows, this evolution of the internal control process has been reactive in nature and did not develop in a proactive way to stem corporate reporting problems.
Number of Pages in PDF File: 16
Keywords: Sarbanes-Oxley, Internal Control, Corporate Reporting, Auditing History
JEL Classification: G34, G38, M41, M49, N82working papers series
Date posted: April 6, 2004
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