The Impact of Sarbanes-Oxley on Internal Control Remediation

19 Pages Posted: 9 Apr 2009

See all articles by Kam C. Chan

Kam C. Chan

Pace University

Gary Kleinman

Montclair State University

Picheng Lee

Pace University - Department of Accounting

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2009

Abstract

This study uses logistic regression analysis to examine the determinants of internal control weakness remediation on a sample of firms that reported internal control weaknesses at the end of fiscal year 2004, and then reported the presence or absence of internal control weaknesses at the end of fiscal year 2005. Our sample included 243 firms. Of these, 174 firms reported internal control weaknesses in the 2004 filing with the SEC, but had successfully remediated them one year later. The remaining 69 firms reported internal control weaknesses in 2004 and again in 2005. We found that resources available to the firms (e.g., return on assets, size) was positively associated with remediation. Use of a Big 4 auditor, having more audit committee meetings, having more business segments, having less time to remediate between the 2004 financial statement filings and the end of the 2005 fiscal year (i.e., filing lag) were negatively associated with successful remediation. Also negatively associated with remediation were the number and type (general control weakness versus specific account weakness) of internal control weaknesses the firms had.

Keywords: Sarbanes-Oxley, Corporate Governance, Internal Control, Section 404

Suggested Citation

Chan, Kam C. and Kleinman, Gary and Lee, Picheng, The Impact of Sarbanes-Oxley on Internal Control Remediation (March 1, 2009). Pace University Accounting Research Paper No. 2009/05. Available at SSRN: https://ssrn.com/abstract=1370494 or http://dx.doi.org/10.2139/ssrn.1370494

Kam C. Chan

Pace University ( email )

Lubin School of Business
Pleasantville, NY 10570
United States

Gary Kleinman

Montclair State University ( email )

NJ 07043
United States

Picheng Lee (Contact Author)

Pace University - Department of Accounting ( email )

1 Pace Plaza
New York, NY 10038-1502
United States

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