Abstract
Purpose statement. The purpose of this study was to determine if the Sarbanes-Oxley Act is improving corporate governance and reducing fraud by identifying quantitative criteria that experts believe are likely to predict and measure the effectiveness of this legislation. Methodology. The study uses a descriptive research design employing a Delphi process. The Delphi Technique is a well-known qualitative, structured, anonymous interactive research process used to obtain consensus on judgment issues that are not easily quantified. The study sample consisted of a panel of twenty high-profile experts from within the accounting and finance fields. Findings. The expert panel clearly expressed its opinion that a reduction in fraudulent activity, whether or not the fraud results in financial losses, is going to be the most effective measure of Sarbanes-Oxley effectiveness. The top two rated criteria were from the fraud category and also were the only two criteria in the top quartile to achieve consensus. In short, the panelists agreed the strongest measure of effectiveness of Sarbanes-Oxley would be a reduction in the amount of market capitalization losses attributable to fraud and a reduction in the number of SEC enforcement actions. Summary. Fraud is a complex social phenomenon. Attempts to legislate morality into the offices of American business will not be effective and certainly will not be cost effective. As a society, we should not accept fraud in any form, but, in particular, we should not accept the financial malfeasance we saw associated with Enron, WorldCom, and the others. The question is whether fraud can be prevented with proactive and preemptive processes or whether criminal and civil sanctions should be pursued subsequent to a crime being committed. The author contends that you should do both, provided the preemptive processes are cost effective. If not cost effective, a preemptive cure can be more costly than the disease. There are many great features of the Sarbanes-Oxley Act that should produce better governance, improved financial reporting, and more transparent financial disclosure. However, Sarbanes-Oxley should not and cannot be solely an anti-fraud measure.