Research Description:

Perceived Cost-Benefit Relationship of the Sarbanes-Oxley Act

My research project is going to look at how necessary and useful the provisions of Sarbanes-Oxley are (also known as the Public Company Accounting Reform and Investor Protection Act of 2002). The Sarbanes-Oxley Act was created in response to large-scale corporate accounting scandals including Enron, Tyco International, and WorldCom. I have chosen accounting professors and stock market investors as my sample because they are knowledgeable about the Sarbanes-Oxley provisions. My hypothesis is that accounting professors perceive that financial statements have become more reliable since the implementation of Sarbanes-Oxley. Also, I hypothesize that accounting professors perceive that the cost of implementing Sarbanes-Oxley exceeds the value of the benefits derived from the adoption.  I hypothesize that stock market investors perceive that the cost of implementing Sarbanes-Oxley does not exceed the benefits derived. I will create a survey and distribute it to accounting professors in order to measure the professor’s education and professional experience related to financial accounting, political ideology, and attitudes towards Sarbanes-Oxley. I will take these measures and correlate how those factors affect whether the professors perceive that the benefits outweigh the costs of implementation and whether they perceive that financial statements have become a more reliable measure of the performance of public companies. A different survey will be distributed to stock market investors to measure their attitudes about Sarbanes-Oxley and the cost-benefit relationship. Sarbanes-Oxley supports the creation of accurate and reliable financial statements. If accounting professors and stock market investors perceive that financial statements have become more reliable, then they trust that public companies are more accurately reporting their financial positions. This research study will examine whether Sarbanes-Oxley is aiding the perception that public companies are preparing more reliable financial statements. It will also examine the perception of whether or not the benefits of implementation exceed the costs of implementation.