Title: The Sarbanes-Oxley act and the production efficiency of public accounting firms in supplying accounting auditing and consulting services: an application of data envelopment analysis

Authors: Mei-Hwa Lin, Hiu Lam Choy, William W. Cooper, Hsihuia Chang

Addresses: National Chengchi University, Taipei, Taiwan. ' Drexel University, Philadelphia, PA, USA. ' University of Texas, Austin, TX, USA. ' Drexel University, Philadelphia, PA, USA

Abstract: In this paper, we employ alternate techniques to examine whether passage of the Sarbanes-Oxley (SOX) Act has had positive effects on the efficiency of public accounting firms. These alternate techniques extend from use of the non-parametric, |frontier| oriented method of Data Envelopment Analysis (DEA), and include more traditional regression-based approaches using central tendency estimates. Using data from 58 of the 100 largest accounting firms in the USA, we find that efficiency increased at high levels of statistical significance and discover that this result is consistent for all of the different methods – frontier and central tendencies used in this paper. We also find that this result is not affected by inclusion or exclusion of the Big 4 firms. All results are found to be robust as well as consistent.

Keywords: Sarbanes-Oxley Act; SOX; public accounting firms; USA; United States; production efficiency; data envelopment analysis; DEA; accounting services; auditing services; consulting services.

DOI: 10.1504/IJSSCI.2008.017586

International Journal of Services Sciences, 2008 Vol.1 No.1, pp.3 - 20

Published online: 18 Mar 2008 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article