<p>With the advent of corporate scandals in North America most notably the Enron case, the US congress passed the Sarbanes-Oxley Act to redress the situation. This act aims to restore confidence of investors in financial markets, and to improve the management of companies. The three main principles of the Act are: exactitude and availability of information, responsibility of managers, and independence of auditors. The section 404,which is one of the main sections of the act, deals with internal control and requires that management undertake an assessment of internal control over financial reporting. This section can be considered to be the focal point of the Sarbanes-Oxley law and is the main focus of our study. The Sarbanes-Oxley act is an American law but European companies who seek funds in the US markets also have to comply with the act. This led us to formulate the following question:</p><p>How does the section 404 of Sarbanes-Oxley Act impact on European companies in terms of Internal Control over Financial Reporting?</p><p>To answer the research question, we have chosen to undertake an exploratory study,concentrating on Sweden.</p><p>We have conducted our study using a qualitative method, making interviews to gather primary data. The companies we interviewed all had their headquarters located in Sweden and had to comply with SOX. We conducted four interviews with companies of different sizes, different industries and which most importantly, had implemented Sarbanes-Oxley for different reasons.</p><p>Basing our research on the following theory:</p><p>Risks when realizing the financial statements.</p><p>Material misstatements (errors) in financial reports.</p><p>The Sarbanes-Oxley act,</p><p>And more precisely the section 404 of the act,</p><p>We built up an interview guide that we used for the interviews. Our theory and the interview guide helped us to focus on key points during our research. We looked for the consequences of the implementation of Sarbanes-Oxley, the impact of section 404 on material errors, the European perspective following Sarbanes-Oxley and the general point of view of the interviewees.</p><p>The result of our studies is that the implementation of the section 404 of the Sarbanes-Oxley Act had a positive impact on the companies. Indeed many improvements have been noticed after the implementation of Sarbanes-Oxley, such as the improvement of the organization of the company, the level of competence of the employees (especially of the management and the employees of the financial department), better communication, and improved IT systems. Companies are more able to focus on internal control and they recognize that it’s an important and useful tool for the company. Companies also agreed on the benefits of the COSO framework for developing internal control within the company.</p>

With the advent of corporate scandals in North America most notably the Enron case, the US congress passed the Sarbanes-Oxley Act to redress the situation. This act aims to restore confidence of investors in financial markets, and to improve the management of companies. The three main principles of the Act are: exactitude and availability of information, responsibility of managers, and independence of auditors. The section 404,which is one of the main sections of the act, deals with internal control and requires that management undertake an assessment of internal control over financial reporting. This section can be considered to be the focal point of the Sarbanes-Oxley law and is the main focus of our study. The Sarbanes-Oxley act is an American law but European companies who seek funds in the US markets also have to comply with the act. This led us to formulate the following question: How does the section 404 of Sarbanes-Oxley Act impact on European companies in terms of Internal Control over Financial Reporting? To answer the research question, we have chosen to undertake an exploratory study,concentrating on Sweden. We have conducted our study using a qualitative method, making interviews to gather primary data. The companies we interviewed all had their headquarters located in Sweden and had to comply with SOX. We conducted four interviews with companies of different sizes, different industries and which most importantly, had implemented Sarbanes-Oxley for different reasons. Basing our research on the following theory: Risks when realizing the financial statements. Material misstatements (errors) in financial reports. The Sarbanes-Oxley act, And more precisely the section 404 of the act, We built up an interview guide that we used for the interviews. Our theory and the interview guide helped us to focus on key points during our research. We looked for the consequences of the implementation of Sarbanes-Oxley, the impact of section 404 on material errors, the European perspective following Sarbanes-Oxley and the general point of view of the interviewees. The result of our studies is that the implementation of the section 404 of the Sarbanes-Oxley Act had a positive impact on the companies. Indeed many improvements have been noticed after the implementation of Sarbanes-Oxley, such as the improvement of the organization of the company, the level of competence of the employees (especially of the management and the employees of the financial department), better communication, and improved IT systems. Companies are more able to focus on internal control and they recognize that it’s an important and useful tool for the company. Companies also agreed on the benefits of the COSO framework for developing internal control within the company.

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Under the development trend of globalization, enterprises are forced to follow the vision of corporate governance. Enterprises must construct an effective internal controlling system in the basic running environment, and strengthen the enterprises risk management, follow the SOX norm to improve the corporate image then march toward the internationalization. This research adopts the case study, choosing the representative enterprise, the ASE Incorporated. By the way of depth interview and analysis in the relational papers, we have the main conclusions as the result as follows. First, Strength the stratagems of corporate governance: Raising the information transparency, establishing the internal management process and strengthen the enterprises risk management, etc. The ASE Incorporated combines the SOX and internal control norm, in order to make the result of resources integration. Second, balance the legal systems and practices of independent director: Shown in the secondary materials and analyze other information of this research, the legal systems and practices are not in opposing side. The considerations of setting up the independent director can improve the quality of decision and raise the effects, but do not influence the decision-making by way of full powers. However, it can intensify the governance efficiency. We make some suggestions for the enterprises. It is including place importance of internal control system and internal audit management and enhancement the information system. The good institutional framework can be expected the development goal of corporate governance.

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This thesis investigates the investment preferences of institutional investors in the United States (US). In the second chapter, I analyse the impact of both firm and country-level determinants of foreign institutional investment. I find that the governance quality in a foreign institutional investor's (FII) home country is a determinant of their decision to invest in the US market. My findings indicate that investors who come from countries with governance setups similar to that of the US invest more in the United States. The investment levels though, are more pronounced for countries with governance setups just below that of the US. My results are consistent with both the 'flight to quality' and 'familiarity' arguments, and help reconcile prior contradictory empirical evidence. At the firm level, I present unequivocal evidence in favour of the familiarity argument. FII domiciled in countries with high governance quality prefer to invest in US firms with high corporate governance quality. In the third chapter, I investigate the impact of the Sarbanes-Oxley Act (SOX) on foreign institutional investment in the United States. I find that, post-SOX, FII increase their equity holdings in US listed firms. This result is mainly driven by passive, non-monitoring FII, who have the most to gain from the SOX-led reduction in firm information asymmetry, and the consequent reduction in the value of private information. The enactment of SOX appears to have changed the firm-level investment preferences of FII towards firms that would not be their traditional investment targets based on prudent man rules, e.g., smaller and riskier firms. In contrast to the extant literature, which mostly documents a negative SOX effect for the US markets, my chapter provides evidence of a positive SOX effect, namely the increase in foreign investment. In the fourth chapter, I examine the effect of SOX on the relation between firm innovation and institutional ownership. I find that US firms investing in innovation attract more institutional capital post-SOX. Prior literature highlights two SOX effects that could cause this result: a decreased level of information asymmetry (direct effect) and increased market liquidity (indirect effect). My findings support the direct effect, as I find that the positive relation between innovation and institutional ownership is driven by passive and dedicated institutional investors. A reduction in firms' information asymmetry is beneficial for these investors while they gain less from increased market liquidity. Overall, my results indicate that SOX is an important policy that has strengthened the institutional investor's support for firm innovation.

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This dissertation documents and evaluates certain financial and non-financial strategies used by the public accounting profession to influence audit regulation during the policy formation period of the Sarbanes-Oxley Act of 2002 (SOX). The dissertation is comprised of three separate, but related studies. Each study uses prior research in accounting and related disciplines to investigate significant aspects the profession's strategies. The first study evaluates the rationality and effectiveness of political action committee (PAC) contributions paid by the accounting profession to members of Congress. The study finds that the accounting profession rationally allocated more PAC contributions to top congressional leaders and to members of committees having jurisdiction over SOX. The study also finds that the accounting profession allocated more PAC contributions to legislators with a history of pro-business roll call voting behavior and to candidates in close electoral races. This evidence suggests that the profession is motivated to contribute cash to legislators in order to gain access to lobby and to influence the ideological composition of the legislature. A voting model also finds a positive relationship in two instances between PAC contributions and roll call voting favorable to the economic interests of the profession in the House of Representatives. The second study evaluates the effect of these PAC contributions on Committee members' frequency and mode of speech during public hearings related to SOX. Using computerized computational linguistics, the study finds a significant positive association between PAC contributions and speech performance. The study also finds differential uses of modals and certain verbs between legislators depending upon party affiliation. The third paper explores the rhetoric of the accounting profession's public interest ideal and the profession's motivation to invoke public interest arguments in various contexts. I approach my analysis from three different perspectives. The first perspective analyzes the public interest language of the profession as well-intentioned rhetoric. The second approach eschews any well-intentioned motivations on behalf of the profession and casts public interest arguments as propaganda cloaking self-interested action. The third approach deconstructs the public interest ideal as myth, embodying a constellation of elements including cultural values, political doctrine and contingent interests.

This study explores the relationship between an individual's current professional occupation and the effect of the order of information on their evaluation when making internal control effectiveness judgments. The Sarbanes-Oxley Act (SOX) requires a new mindset for individuals that have responsibility for the internal controls in place at an organization. SOX requires both auditors and management to evaluate the effectiveness of the internal controls over financial reporting. Prior to the implementation of SOX, auditors were required to evaluate internal controls and their effect on the reliability of the financial statements; however, neither group was required to provide an opinion to the public regarding the findings of the evaluation. This study utilizes a within- and between-subjects research design, using the subjects' occupation (auditor or management) as one independent variable, and manipulating the order in which the cases are received by the subjects for the second independent variable. For each case, the subjects were provided three internal control judgments: effectiveness and efficiency of operations, reliability of financial reporting, and Sarbanes-Oxley required internal control effectiveness judgment. Additionally, subjects indicated their reliance on each of the internal control effectiveness cues included by allocating 100 points among each of the six cues included in the instrument. Based on the results of the current study, auditors and management did not provide different judgments. Additional analyses were conducted to explore whether experience impacts the self-insight individuals have into their reliance on cues when providing judgments. Findings did not indicate that subjects with greater experience were more likely to have greater insight into their reliance on information. The findings suggest that neither role nor case ordering affected the subjects' professional judgment. Overall, auditors and management did not provide statistically significant different judgments in relation to Sarbanes-Oxley judgments. The similarity in judgments should provide some reassurance to auditors and investors that given no guidance but the same information for judgments, management and auditors will come to similar conclusions regarding the effectiveness of internal controls over financial reporting. / Ph. D.