How Has the Sarbanes-Oxley Act Affected CPA Firm Fee Productivity?

Abstract

In this paper, we estimate a production function for CPA firms to examine the effect of the Sarbanes-Oxley (SOX) Act on CPA firm fee productivity. Using annual survey data for 57 large CPA firms in the U.S. for the period from 2000 to 2005, we find that the fee productivity of CPA firms in transforming human resources into service revenues increases in the post-Act period. Consistent with our expectations and with the first year deadline for compliance of Section 404 of SOX, this increase in the fee productivity of CPA firms was particularly strong in 2004. The current evidence seems to suggest that SOX is value-enhancing for CPA firms.

Keywords: Sarbanes-Oxley Act, CPA firms, Fee productivity

JEL Classification: D24, L11