Is SOX 404(A) management internal control reporting an effective alternative to SOX 404(b) internal control audits?

Yangyang Fan, Chan Li, K. Raghunandan

Research output: Journal article publicationJournal articleAcademic researchpeer-review

6 Citations (Scopus)


SUMMARY: Section 404 of the Sarbanes-Oxley Act (SOX; U.S. House of Representatives 2002) continues to be controversial. Using samples of Securities and Exchange Commission (SEC) registrants with market capitalizations of less than $150 million, we find that non-accelerated filers have a significantly larger reduction in the likelihood of material misstatements, discretionary revenues, and discretionary accruals compared to smaller accelerated filers after non-accelerated filers became subject to the requirements of Section 404(a). Our findings are consistent with the argument that management reporting on internal controls (Section 404(a)) may be a cost-effective alternative to internal control audits (Section 404(b)) for smaller U.S. public companies.

Original languageEnglish
Pages (from-to)71-89
Number of pages19
Issue number3
Publication statusPublished - 1 Jan 2017


  • Internal control
  • Material misstatement
  • SOX 404

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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