UW Professor Helps Measures Results of Sarbanes-Oxley

April 6, 2005

UW-Madison Accounting Professor Larry E. Rittenberg has co-authored a report measuring the costs and benefits of the Sarbanes-Oxley Act of 2002. The Act established new financial reporting requirements. His co-author was Patricia K. Miller, a partner in Deloitte and Touche LLP.

The report examined the responses of 171 chief audit executives and internal audit managers. Published by the Institute of Internal Auditors (IIA) Research Foundation, it identified control improvements that occurred directly as a result of performing Sarbanes-Oxley 404 work. The report also addressed the future cost of compliance and the long-term role internal auditors will play.

The business community is just now entering the stage at which assessing the preliminary benefits of 404 implementation is possible, Rittenberg said. Although it will be a long time before anyone can conclusively comment on whether the benefits are in line with the costs, this survey offers insight into the first impression leaders are getting regarding the subject.

Miller added, Section 404 implementation is new for everyone, and the respondents shared their key findings and recommendations for improving the compliance process. Although a majority of the respondents felt the costs had exceeded the benefits in the first year, many chief audit executives did report that the process had yielded positive results in terms of strengthening controls, and had taught lessons that can improve the efficiency and effectiveness of control evaluations in the future.

Rittenberg has been on the accounting faculty at UW-Madison since 1976. He is the Ernst & Young Professor of Accounting and also is chairs the national organization involved in financial reporting standards, the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Miller has been with Deloitte and Touches Northern California Enterprise Risk Services practice since 1997 and serves on the IIA board executive committee.

The full report is available free of charge at the IIA Web site.