Internal Audit Outsourcing and the Risk of Misleading or Fraudulent Financial Reporting: Did Sarbanes-Oxley Get It Wrong?

@inproceedings{Prawitt2012InternalAO,
  title={Internal Audit Outsourcing and the Risk of Misleading or Fraudulent Financial Reporting: Did Sarbanes-Oxley Get It Wrong?},
  author={Douglas F. Prawitt and Nathan Y. Sharp and David A. Wood},
  year={2012}
}
The Sarbanes-Oxley Act (SOX) prohibits companies from outsourcing internal audit work to their external audit provider. Competing predictions on the effects of this prohibition stem from two academic arguments relating to the provision of nonaudit services by the external auditor: knowledge spillover and economic bonding. Using proprietary data, we investigate whether companies that outsourced internal audit work to their external auditor pre-SOX had a higher risk of misleading or fraudulent… CONTINUE READING

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