A Critical Analysis of Auditors' Perception of the Impact of Section 404 of the Sarbanes Oxley Act on Audit Quality: An Egyptian Perspective

Hegazy, Mohamed and Kamer, Noha. A critical analysis of auditors' perception of the impact of section 404 of the Sarbanes Oxley Act on audit quality: an Egyptian perspective. Afro-Asian J. Finance and Accounting, 2(2), 154-182

29 Pages Posted: 18 Jun 2014

See all articles by Mohamed A. Hegazy

Mohamed A. Hegazy

Department of Accounting, The American University in Cairo

Date Written: January 1, 2010

Abstract

The recent accounting scandals that have occurred in the U.S have resulted in the issuance of the Sarbanes Oxley Act (SOX), with emphasis on section 404 related to enhancing the companies' internal controls. This research study critically examines section 404 requirements, surveying a sample of Egyptian auditors in a number of audit firms with international affiliations about their perception of the expected costs and benefits that could result from applying section 404, and whether such requirements could have a positive impact on the quality of audit. The results provide evidence based on auditors` opinions that the benefits associated with section 404 applications are expected to outweigh its costs, with possible reduction of section 404 costs in the future period. Moreover, the results indicate that both the additional audit procedures required in the audit of internal control over financial reporting (ICOFR) and the increased legal liability that will be imposed on auditors through compliance with section 404 requirements are expected to improve the quality of the audit process. The results of the study call for the application of similar requirements of section 404 taking into consideration the characteristics and other elements affecting the Egyptian businesses, accounting and auditing profession

Keywords: Sarbanes Oxley Act, Section 404, Audit quality, Audit procedures, Legal liability, Internal Control, External Auditing, Egypt

JEL Classification: M41

Suggested Citation

Hegazy, Mohamed A., A Critical Analysis of Auditors' Perception of the Impact of Section 404 of the Sarbanes Oxley Act on Audit Quality: An Egyptian Perspective (January 1, 2010). Hegazy, Mohamed and Kamer, Noha. A critical analysis of auditors' perception of the impact of section 404 of the Sarbanes Oxley Act on audit quality: an Egyptian perspective. Afro-Asian J. Finance and Accounting, 2(2), 154-182. Available at SSRN: https://ssrn.com/abstract=2450722

Mohamed A. Hegazy (Contact Author)

Department of Accounting, The American University in Cairo ( email )

6 Boulos Hanna Street
Dokki
Cairo
Egypt
0020101699301 (Phone)
0020237600215 (Fax)

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