Management Accountants' Response to SOX: A Survey of Controllers
Matherly, C. Michele, McWhorter, Laurie B., Frizzell, DesereÃ© M., Management Accounting Quarterly
A SURVEY OF MEMBERS OF IMA'S CONTROLLERS COUNCIL SUGGESTS THAT SOX COMPLIANCE ENCOURAGES TACTICAL DECISION MAKING BUT OFTEN AT THE EXPENSE OF LONG-TERM OR STRATEGIC THINKING.
To date, researchers have concentrated on how the Sarbanes-Oxley Act (SOX) affects auditors, yet senior management relies on the expertise of management accountants to develop, implement, and monitor the internal controls that are at the heart of SOX. In order to better understand how corporate accountants view SOX, we surveyed members of the Institute of Management Accountants (IMA), asking several general questions regarding how SOX will influence the accounting profession. We also inquired about specific changes that the members' organizations are making to comply with the provisions of SOX and whether SOX has added to their stress level.
We surveyed members of the IMA's Controllers Council with valid e-mail addresses. Because our study related to SOX issues, we removed non-U.S. addresses and those with university extensions (.edu). We received a total of 293 usable responses-a 20% response rate. We did not know beforehand where the IMA members were employed. To better focus on SOX issues, we excluded respondents in industries that clearly did not fall under SOX (i.e., government and nonprofit organizations and public accounting firms). Of the remaining 267 respondents in the final sample, 45% worked at firms that are subject to SOX.
In the survey, we asked several questions about respondents' opinions of SOX. Most of the questions were answered using a seven-point Likert scale, where 1 = strongly disagree and 7=strongly agree. We grouped responses ranging from five to seven as "agree" and one to three as "disagree." To evaluate the response means, values of four were considered neutral, and those greater (less) than four indicated a level of agreement (disagreement).
As seen in Table 1, the respondents' organizations represent a wide range of industries. The two most common employers were manufacturers (almost 40% of the respondents) followed by organizations in the financial services sector (nearly 10%). The sample included a variety of diff e rent-sized organizations (see Figure 1). Even so, the respondents tended to work for either relatively small organizations (â¤250 employees) or fairly large ones (>5,000 employees). In terms of revenue, about 60% of the respondents worked at organizations with less than $500 million in revenue, and 12% indicated their firms had revenue of $8 billion or more.
On average, our respondents had worked for their current employer for 8.5 years. About 10% of the respondents reported being at their current organization for less than two or more than 20 years. Because we surveyed IMA's Controllers Council, the individuals in our sample possessed substantial manager-level experience, an average of 13.5 years.
We analyzed the results using three criteria to divide the respondents. First, we compared SOX adopters (45%) and nonadopters (55%). Second, we examined the replies based on respondents' managerial work experience. We classified respondents as having more or less experience relative to the mean managerial experience of 13.5 years. Finally, we split the responses using organizational size where "small" represents 500 or fewer employees and "large" equals greater than 500 employees. By classifying the respondents this way, we partitioned the sample into two fairly equal groups: 49% small vs. 51% large. Because SOX is more likely to impact large organizations, the SOX adoption and organization-size subgroups may overlap. Although the correlation between the two groups was significant (p=0.0001), the correlation coefficient (-0.46) indicated that the two subgroups capture different phenomena, so we report the results from both subgroups.
PERCEIVED EFFECTIVENESS OF SOX
Congress enacted SOX to satisfy the public outcry for reform after a series of unprecedented accounting scandals (Enron, WorldCom, HealthSouth, and others). …