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Accidentally in the public interest: The perfect storm that yielded the Sarbanes-Oxley act

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  • Canada, Joseph
  • Kuhn, J. Randel
  • Sutton, Steve G.

Abstract

In the face of varied protests over the mandates of the U.S. Sarbanes-Oxley Act, pressure has mounted to ease the impact of Sarbanes on non-U.S. companies and smaller companies. The rhetoric around these protests tend to be based on essentially three issues: (1) the imperialistic nature of the U.S. legislation, (2) the abnormal fashion in which the Act worked its way through the U.S. legislative process, and (3) the balance between costs and benefits of the requirements mandated in Sarbanes. This study focuses on working through the rhetoric in order to understand the intent of Sarbanes, the perfect storm that developed and carried the bill through the legislative process, and the debate over costs versus benefits. The position that is arrived at in the paper is that a simultaneous combination of intense scrutiny by the press, the unveiling of another major financial scandal (i.e. WorldCom), and a Senate committee that placed heavy reliance on former SEC Chairman Levitt's corporate governance proposals created a storm that the business and accounting lobbies could not counter, and the result was a significant piece of legislation that almost by accident created one of the greatest protections in history for the public interest within the arena of the financial markets and related corporate behavior. The benefits appear to be worth the costs.

Suggested Citation

  • Canada, Joseph & Kuhn, J. Randel & Sutton, Steve G., 2008. "Accidentally in the public interest: The perfect storm that yielded the Sarbanes-Oxley act," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 19(7), pages 987-1003.
    • Handle: RePEc:eee:crpeac:v:19:y:2008:i:7:p:987-1003
    DOI: 10.1016/j.cpa.2007.04.006
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    References listed on IDEAS

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    1. Allan Graham & Bing-Xuan Lin & David Michayluk & Pamela Stuerke, 2007. "Sarbannes-Oxley: Some Unintended Consequences," Published Paper Series 2007-4, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
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    2. Sylvie Héroux & Mélanie Roussy, 2020. "Three cases of compliance with governance regulation: an organizational learning perspective," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(2), pages 449-479, June.
    3. Justin Logie & Warren Maroun, 2021. "Evaluating Audit Quality Using the Results of Inspection Processes Performed by an Independent Regulator," Australian Accounting Review, CPA Australia, vol. 31(2), pages 128-149, June.
    4. Keyser, John D., 2023. "Examine the available evidence: Was the Duhnke PCAOB captured?," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 97(C).
    5. Paisey, Catriona & Paisey, Nicholas J., 2012. "Whose rights? Professional discipline and the incorporation of a (human) rights framework: The case of ICAS," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 23(1), pages 17-35.
    6. Paisey, Catriona & Paisey, Nicholas J., 2020. "Protecting the public interest? Continuing professional development policies and role-profession conflict in accountancy," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 67.
    7. Ferhat D. Zengul & James D. Byrd & Nurettin Oner & Mark Edmonds & Arline Savage, 2019. "Exploring corporate governance research in accounting journals through latent semantic and topic analyses," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 26(4), pages 175-192, October.
    8. Dillard, Jesse & Vinnari, Eija, 2017. "A case study of critique: Critical perspectives on critical accounting," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 43(C), pages 88-109.
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    10. Maroun, Warren, 2015. "Reportable irregularities and audit quality: Insights from South Africa," Accounting forum, Elsevier, vol. 39(1), pages 19-33.

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