The Sarbanes-Oxley Act intends to protect investors by making the financial reporting practices of public companies more transparent, but Wake Forest University accounting expert Jon Duchac says the act could create unintended consequences for some businesses.
“A number of provisions have generated unanticipated effects that could have significant implications,” Duchac says.
One such provision is the mandate for internal control reviews. Starting with fiscal years that end on or after November 15, 2004, companies must thoroughly test and document the financial reporting practices of their internal accounting departments. The findings are to be filed every year with annual reports.
“Many companies will not be able to meet their first deadline,” Duchac says. “This may be interpreted as an indicator of internal control and financial reporting problems within the company and can raise concerns over the quality of earnings.”
Duchac is the Merrill Lynch Associate Professor of Accountancy and director of the Enterprise Risk Management program at Wake Forest’s Calloway School of Business and Accountancy. He is available to comment on Sarbanes-Oxley, and recently wrote an article on these issues for the Merrill Lynch publication “The Portfolio Manager’s Review.”
Contact Maggie Barrett at 336-758-5237 or barretmb@wfu.edu.
Categories: Faculty, Research, School of Business
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