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Research Agenda
Impact of Changes to the Auditing and Accounting Environment (Sarbanes-Oxley Act of 2002) on the Listing Status of Small Business
Project Leader: Eric Talley
The Sarbanes-Oxley Act of 2002 (Sarbox) is creating major changes in the accounting and auditing environment for publicly-traded firms. In particular, among its other provisions, the Sarbox legislation establishes requirements for corporate annual reports and demands that senior executives personally certify financial statements. Different predictions have been made on what the net effects will be. Some argue that the changes will make it easier for small businesses to make the transition to publicly traded status because the additional reports and assessments they will have to produce will help convince prospective investors that good internal controls are already in place. Others have pointed out that reporting requirements will cause significant increases in external auditing costs and discourage small businesses from pursuing registration or, if they are already registered, cause them to delist. This study will gather data to build a historical baseline on small business listing behavior, quantify the potential effect of Sarbox and make predictions on the long-term effects of Sarbox on small business.
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