Fixing 404.

Michigan Law Review, June, 2007 by Bochner, Steven E.; Grundfest, Joseph A.

Although debate persists as to whether the costs of Sarbanes-Oxley's Section 404 regulations exceed their benefits, there is broad consensus that the rules have been inefficiently implemented. Substantive and procedural factor's contribute to the rules' inefficiency.

From a substantive perspective, the terms "material weakness" and "significant deficiency" are central to the implementing regulations and are easily interpreted to legitimize audits of controls that have only a remote probability of causing an inconsequential effect on the issuer's financial statements. As a quantitative matter, the literature suggests that a control with a remote probability of causing an inconsequential effect has an expected value of only five one-hundredths of one percent of...

Read the rest of this article with a Free Trial at HighBeam Research.

Premium Content Partnership | HighBeam Research provides an in-depth online archive library of reference works.