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Investor Advocates Join Center for Audit Quality in Calls to Preserve a Key Provision of the Sarbanes-Oxley Act

Tuesday, May 2, 2017

New surveys show financial advisors and CFOs agree the 2002 law has improved reliability of financial information

Washington, DC – In a joint letter to House Financial Services Committee leadership, the Center for Audit Quality (CAQ), Council of Institutional Investors (CII), and CFA Institute today expressed shared opposition to any legislation that would erode Section 404(b) of the Sarbanes Oxley-Act (SOX) or that would revise the definition of accelerated filer as defined in Securities Exchange Act of 1934.

The letter, sent ahead of the House Financial Services Committee’s scheduled May 2 markup of the Financial CHOICE Act 2017 Discussion Draft, outlines the many benefits for companies that meet the current definition. These benefits include enhanced investor and market confidence in financial information that is among other things, timely and verified independently which research shows, in turn, can lead to lower cost of capital.

“We commend efforts to strengthen the US economy and help companies raise capital; however, we do not believe Section 404(b) of SOX is a regulatory burden or impediment to capital formation. In fact, we refer you to academic research that indicates that any increase in the public float threshold would not spur capital formation, and could have the unintended consequence of eroding investor confidence and the quality of public company financial reporting. Additionally, as discussed below, two recent surveys of financial advisors and chief financial officers (CFOs) demonstrate that Section 404(b) is beneficial to our markets and investors,” the CAQ, CII, and CFA Institute, stated in the letter.

The surveys cited in the letter were conducted separately by independent research firms on behalf of the CAQ. They revealed that 74 percent of certified financial advisors and 85 percent of public company CFOs support important investor protection provisions in SOX.

Eighty-two percent of financial advisors and 79 percent of CFOs say SOX, which 15 years ago established a wide range of measures to strengthen financial reporting, has improved the reliability of financial information.

“These polls provide yet another indicator of the extraordinary and confidence-building success of the Sarbanes-Oxley Act,” said CAQ Executive Director Cindy Fornelli. “The law helped to enhance the quality of financial information on which financial executives and financial advisors rely.”

Since 1977, federal law has required public companies to establish and maintain a system of internal control over financial reporting (ICFR) that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. SOX—passed nearly unanimously by Congress in the wake of high profile corporate frauds—added a requirement, Section 404(a), that management annually assess the effectiveness of the company’s ICFR and report the results to the public. SOX 404(b) requires public companies to engage an independent auditor to attest to management’s ICFR assessment.

Seventy-three percent of financial advisors surveyed said that it would benefit their clients if all public companies were required to have an independent ICFR audit. Currently, companies with market capitalizations of less than $75 million are exempted from complying with SOX Section 404.

According to the CAQ’s CFO survey, 85 percent of CFOs feel the ICFR audit has helped their company, and 79 percent agree the benefits of SOX outweigh (or are equivalent to) the costs for their company.

“As policymakers consider potential changes to financial regulation, they should take care not to undermine the frameworks that are working demonstrably to protect investors and our capital markets,” said Sandy Peters, head of regulatory engagement at CFA Institute. “We call on Congress to safeguard important investor protection provisions that CFAs and their clients use to make wise investment choices.”

“Investors in companies of all sizes should benefit from protections provided under Section 404(b),” said Ken Bertsch, executive director of the Council of Institutional Investors. “We are pleased to join with the CAQ and CFA Institute to urge Congress to preserve 404(b) on behalf of all investors.”

View full survey results:


  • CFO survey was fielded by the Glover Park Group, March 27–April 18, 2017. The number of survey respondents was 105 CFOs of publicly traded, US companies. Data collection mode was internet (75 respondents) and phone-to-web (30 respondents).
  • Online survey of financial advisors was fielded by Porter Novelli/Qualtrics February 23-27, 2017. A total of 300 qualified practicing financial advisors completed the survey.

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The Center for Audit Quality (CAQ) is an autonomous public policy organization dedicated to enhancing investor confidence and public trust in the global capital markets. The CAQ fosters high quality performance by public company auditors, convenes and collaborates with other stakeholders to advance the discussion of critical issues requiring action and intervention, and advocates policies and standards that promote public company auditors’ objectivity, effectiveness, and responsiveness to dynamic market conditions. Based in Washington, DC, the CAQ is affiliated with the American Institute of CPAs. For more information, visit

The Council of Institutional Investors (CII) is a nonprofit nonpartisan association of public, corporate, and union pension funds, and other employee benefit plans, foundations and endowments with combined assets that exceed $3 trillion. CII member funds are major, long-term investors committed to protecting the retirement savings of millions of American workers. CII also has associate members, including the CAQ, the CFA Institute and asset managers with more than $20 trillion in assets under management. CII is the leading voice for effective corporate governance and strong shareowner rights.

CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. The organization is a champion for ethical behavior in investment markets and a respected source of knowledge in the global financial community. The end goal: to create an environment where investors’ interests come first, markets function at their best, and economies grow. CFA Institute has over 148,000 members in 163 countries and territories, including 141,000 CFA charterholders, and 147 member societies. For more information, visit