Can Over 1,000 Finance Execs Be Wrong?

Word's out. New survey finds respondents giving SOX a big thumbs-up.

April 3, 2008
by Sukanya Mitra

One minute accountants and auditors are snubbing Sarbanes-Oxley's Act 404 and the next minute they're shouting praises. What's more confounding is that in a recent issue of CFO Magazine, none other than former Congressman Michael Oxley, a founding member of the eponymous Act, said he was disappointed in the results today. What gives?

AICPA's Center for Audit Quality (CAQ) decided to probe the issue and recently surveyed audit committee members nationwide as well as independent board members who oversee the audit process and are top decision-makers and recruiters. The results of the survey were released in the middle of March.

Survey Says...

How has SOX affected audit quality at U.S. companies? More than four out of five survey respondents (82%) viewed overall audit quality to be excellent. CAQ survey found that many audit committee members consider the Sarbanes-Oxley Act to be a positive influence.

What's more, 53 percent of survey respondents agreed that overall audit quality was very good, while one in four (25%) considered it to be "excellent." While 87 percent of respondents did not think there was a high risk of inaccuracies in financial statements due to fraud, three in five (60%) felt that there has been a decline in risk thanks to SOX.

"The CAQ's research tells us that Sarbanes-Oxley is working for investors, audit committee members and our capital markets," said Michael Hooper, co-founder of The Directors' Council and a public member of the CAQ's governing board.

Nearly all of the surveyed audit committee members (99%) said they spend more time on their committee work because of SOX, and 90 percent said they work more closely with external auditors.

Have Things Really Changed?

In late July 2007, the Glover Park Group, a private strategic communications company, conducted a telephone survey with 1,001 investors on the impact of Sarbanes-Oxley, both general and specific.

According to its findings, more than half of respondents (56%) believed SOX was a good idea, while only five percent thought it was a bad idea.

The survey also revealed that a large number of investors think the rules probably (32%) or definitely (30%) should fundamentally remain unchanged. Surprisingly, 62 percent of investors say they would be concerned if SOX was eased, while nearly one in four (21%) said they would be very concerned.

The Glover Report also found more than two-thirds (64% to 79%) of investors noting that the SOX-mandated changes had a positive effect on the quality of audit financial information, while nearly a third (26% to 36%) considered its impact as very positive.

What other positive effects have SOX had? A large majority (79%) feel the requirement to establish independent audit committees has been a positive effect, while 76 percent noted that PCAOB's (Public Company Accounting Oversight Board) involvement has been very positive. While one-third (32%) believed that certification of financial reports by CEOs and CFOs has had a very positive effect, nearly three in four (75%) said it had a positive effect.

On the March survey results, Cynthia Fornelli, executive director of the CAQ, said, "The findings confirm that public company audit quality is high and has only gotten better in recent years, according to the people closest to the process."

Surely all these financial execs can't be wrong about SOX.

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Sukanya Mitra is Managing Editor of the Insider™ e-newsletter group.