The Effects of Section 404 of Sarbanes-Oxley Act of 2002 on the Audit Fees of Foreign Firms Listed on U.S. Exchanges PDF Download

Author: Kam C. Chan
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Book Description
Section 404 of Sarbanes-Oxley Act requires firms to report on the effectiveness of their internal control over financial reporting. The Securities and Exchange Commission requires foreign large accelerated filers to provide both management and auditor Section 404 reports starting for fiscal years ending on or after July 15, 2006. This study examines the change in audit fees for foreign firms in their first year of providing auditor attestation reports for fiscal years ending between July 15, 2006 and July 14, 2007. During this time period, only foreign large accelerated filers have to provide both management and auditor Section 404 reports. Foreign accelerated filers only have to provide management Section 404 reports and non-accelerated filers do not have to provide any Section 404 report. We find that foreign large accelerated filers have an average of 74% increase in audit fees in this first year of Section 404 compliance, while the foreign accelerated filers and non-accelerated filers only have increases in audit fees of 33% and 42%, respectively. We also find that the increase in audit fees among foreign large accelerated filers is negatively associated with the strength of the legal environment in their home countries.

Author: Susan M. Gates
Publisher: Rand Corporation
ISBN: 0833043951
Category : Law
Languages : en
Pages : 369

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What are the differential effects of regulation and policy on small businesses? What is the impact of special regulatory treatment for small businesses? This book sheds light on these issues through analysis of the regulatory and public policy environment with regard to small businesses, including focused studies in four key areas: health insurance, workplace safety, corporate governance, and business organization.

Author: Peter Mahon
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Mark Altman
Publisher:
ISBN:
Category :
Languages : en
Pages : 154

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There has been much attention paid to the accounting and auditing professions as of late. After knowledge of the bookkeeping scandals in major companies such as Enron, World Com, and HealthSouth, to name a few, became public, a distrust of large corporations like these seemed to grow. The American people, and more importantly the Securities and Exchange Commission, wanted to know what was going on and put an end to it. In July of 2002, the Sarbanes-Oxley Act was passed in order to increase pressure on the heads of companies to get their numbers straight or face the consequences.

Author: Wilma H. Fletcher
Publisher: Nova Publishers
ISBN: 9781604560879
Category : Business & Economics
Languages : en
Pages : 176

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Book Description
The Sarbanes-Oxley Act of 2002, PL 107-204 described by some as the most important and far-reaching securities legislation since passage of the Securities Act of 1933, 15 USC §§ 77a et seq, and the Securities Exchange Act of 1934, 15 USC §§ 78a et seq, both of which were passed in the wake of the Stock Market Crash of 1929. The Act establishes a new Public Company Accounting Oversight Board which is to be supervised by the Securities and Exchange Commission. The Act restricts accounting firms from performing a number of other services for the companies which they audit. The Act also requires new disclosures for public companies and the officers and directors of those companies. Among the other issues affected by the new legislation are securities fraud, criminal and civil penalties for violating the securities laws and other laws, blackouts for insider trades of pension fund shares, and protections for corporate whistleblowers. This book contains important analyses on the impact of this Act.

Author: Maria T. Caban-Garcia
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Book Description
The enactment of the Sarbanes-Oxley Act (SOX) of 2002 established several reforms to improve corporate governance and financial reporting practices for companies listed in US capital markets. Given the important role played by foreign firms in US capital markets, the present article discusses the early effects of SOX's regulation on foreign firms. Country- and firm-level data provide a descriptive analysis of the characteristics and trends in material weakness in internal controls reporting for firms cross-listed on US exchanges. The discussion includes a description of the implementation timeline of Section 404 for foreign issuers and compares some of these characteristics to reports from US firms. Understanding the characteristics of cross-listed firms, as well as country-specific qualities, is important to auditors and managers as they strive to maintain audit quality and improve internal control practices and corporate governance. This information is beneficial to regulators as these characteristics could have implications in the evaluation of foreign firms' compliance with Section 404 requirements.

Author: Aloke Ghosh
Publisher:
ISBN:
Category :
Languages : en
Pages : 45

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Book Description
We examine changes in fees paid to auditors around the Sarbanes-Oxley Act (SOX, 2002). Audit fees are expected to increase after SOX due to both increased audit effort and potentially increased auditors' legal liability. Our results indicate an economically large increase in audit fees following the enactment of SOX. Controlling for size of the auditor, auditor's opinion, and client characteristics, we find that audit fee levels went up approximately 74 percent in the post-SOX period. In contrast, non-audit fees declined significantly over the same period. Total fees went up during this period because the increase in audit fees offset the decline in non-audit fees. Our conclusions remain unchanged when we use audit fee change regressions. Additionally, we find that the Big 4 audit firms increased audit fees by 42 percent more than their smaller counterparts. Further, we find that while small and large audit firms discount fees on initial engagements to attract new clients for the pre-SOX period, only small audit firms continue of offer fee discounts for the post-SOX years. Our results remain robust even after a battery of sensitivity analyses.

Author: Erin M. Lyons
Publisher:
ISBN:
Category :
Languages : en
Pages : 73

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Abstract: INTRODUCTION: The overlying theme of my research project is investigating the implications of Sarbanes-Oxley (SOX) Act for U.S. foreign relations since its release in 2002. To clarify the focus of this project, I will be concentrating on the requirement under SOX Sections 102 and 106 that stipulate no public accounting firm may issue or prepare an audit report for any public company without registering with the Public Company Accounting Oversight Board (PCAOB). This requirement impacts both U.S. and foreign public accounting firms alike. Furthermore, it has impacted the United States' foreign relations with countries throughout the world and will continue to dominate accounting agenda as the business world diverges away from a strictly domestic perspective into an all-encompassing international affair. RATIONALE: The rationale behind this project is that the PCAOB registration requires all PCAOB registrants to comply with the rules and regulations set forth by the Board regardless of nationality. Consequently, the PCAOB will face a series of obstacles imposing its regulations and subsequent Board actions on foreign firms. This includes enforcing SOX in international jurisdictions, addressing conflicting international accounting standards, political and economic instability, and general backlash toward the United States. The steady decline in foreign companies listing on the U.S. capital market since SOX was released is one example of the economic backlash the U.S. has experienced. METHODOLOGY: My research relies upon documentary analysis conducted on documents collected from trusted academic sources. I examined the congressional hearings on Sarbanes-Oxley prior to its acceptance, PCAOB standards and interpretations, U.S. Department of State releases, and numerous scholarly and academic journals, covering topics in accounting, law, politics and diplomacy. After I collected a sufficient amount of documents, I conducted an in-depth analysis on the source content and extrapolated evidence in support of my investigation. PROPOSED FINDINGS: The strong negative international reaction towards SOX and its implications for foreign accounting firms is a major problem for the U.S. that must be addressed. By requiring foreign registrants' compliance with PCAOB regulations, the U.S. is threatening the sovereignty of foreign nations around the world and tarnishing its image abroad. I believe that the U.S. will need to do one of the following in the near future: 1) Develop a system that evaluates the integrity of foreign oversight systems and accept those nations with an appropriate system as equivalent to the U.S. system, or 2) Work in conjunction with foreign nations to devise an international professional oversight system. Similar to the difficulties faced by the International Accounting Standards Board (IASB), it is unlikely that an international oversight board will be successful. As a result, the PCAOB should work to devise a method to evaluate existing foreign oversight systems and honor those systems when appropriate. If the U.S. does not respond to international concerns over SOX, foreign company membership on the U.S. capital market will continue to decline and the U.S. will isolate itself, suffering politically, economically, and socially.

Author: Donald DePamphilis
Publisher: Academic Press
ISBN: 0123854857
Category : Business & Economics
Languages : en
Pages : 784

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Book Description
Two strengths distinguish this textbook from others. One is its presentation of subjects in the contexts wherein they occur. The other is its use of current events. Other improvements have shortened and simplified chapters, increased the numbers and types of pedagogical supplements, and expanded the international appeal of examples.

Author: Stephen M. Bainbridge
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Book Description
Section 404 of the Sarbanes-Oxley Act of 2002 (SOX) was intended to improve public company internal controls over financial reporting (ICFR). Faulty internal controls were believed to have contributed to many corporate scandals during the dot-com era. Empirical research of the pre-SOX era suggested that reporting companies with poor internal controls tended to have more frequent earnings restatements, more SEC enforcement proceedings, and poorer performance than comparable firms with strong internal controls. When SOX was adopted § 404 was not among the most controversial provisions. Instead, it was the attorney conduct rules, CEO and CFO certification requirements, and the ban on loans to officers and directors--plus the larger question of federalizing corporate governance--that generated most of the early criticism aimed at the statute. Once companies began implementing § 404's mandate for assessments of their internal controls over financial reporting, however, it became apparent that compliance costs were considerably greater than anticipated. In short order, § 404 became--and remains--SOX's most controversial provision. SOX's twentieth anniversary seems an opportune time to reassess the controversy over § 404. There is a considerable body of empirical evidence on the costs and benefits of § 404, which this article reviews. As it turns out, however, there are so many potential confounding factors that all of the evidence must be viewed with a degree of skepticism. Nonetheless, a few conclusions can be drawn. With the benefit of hindsight, it seems clear that Congress in 2002 had no idea what it would cost companies to comply § 404. The SEC had an estimate of what § 404(a) compliance would cost but had no idea what § 404(b) compliance would cost. Sticker shock seems the right description of the reaction once those costs became clear. Section 404 compliance costs were substantial from the outset. Those costs were disproportionately borne by smaller firms from the outset. Section 404 compliance costs remain high and show no signs of dropping over time. It remains the case that those costs are disproportionately borne by smaller firms. As far as achieving its main goal of reducing material weaknesses in ICFR, § 404 cannot be deemed a success. Both adverse managerial reports and auditor attestations actually rose prior to 2014 and have dropped only slightly in the subsequent period. Problems with firms failing to remediate persistent material weaknesses remain a source of concern.