Audit Research After Sarbanes-Oxley Evaluation

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EVALUATION OF REASEARCH PAPER
Title: Audit Research after Sarbanes-Oxley
Author: Mark L. DeFond and Jere R. Francis
A. Describe the research problem or question. Evaluate the importance of the research question to audit practice.
This paper attempts to stimulate research into some of the important questions implicitly raised by SOX regarding the audit profession’s potential failings.
Enron’s failure and the accounting scandals at Worldcom and other companies provide compelling evidence that auditing matters and is important. However, it is unclear that whether auditing was sufficiently “broken” in the first place to warrant the radical reforms and changes effected by the SOX.
The disconnection is large between the scientific evidence on audit quality and institutional changes premised on the assumption that auditing is broken. This research gives us the direction which we need to collect scientific evidence to guide public policy-making in audit.
B. Explain the author’s approach to solving the problem.
The authors discuss the following areas and give some suggestions for future research in each of them:
1. Why auditing matters now more than ever
2. Institutions that affect auditing
3. Engagement-specific characteristics that affect audit quality
4. The role of auditing and corporate governance
5. Audit quality and other accounting firm characteristics
C. Describe the major findings of the research.
1. The criticism embodied in SOX is usually intense, and appears to be partially motivated by political expediency and often based on anecdotes.
2. SOX transforms auditing from a self-regulated industry that is overseen by a government agency, the U.S. Securities and Exchange Commission (SEC), to an industry that is now directly controlled by a quasi-governmental agency, the Public Company Accounting Oversight Board (PCAOB).
3. SOX made changes to…...

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