According to a recent press release, a nationwide telephone survey of 1,000 investors conducted for the Center for Audit Quality (CAQ) indicated that 79 percent of those surveyed felt changes brought about by the Sarbanes-Oxley Act bolstered their confidence in financial information presented.


The release also stated that the surveyed investors believe Sarbanes-Oxley-mandated changes regarding controls around how companies prepare their financial statements and how external public company audit firms audit those controls have had a positive effect: 
• 79 percent believe the requirement to establish independent audit committees has been effective.
• Three-quarters (76 percent) say that external auditors reporting to an independent board-based audit committee has had a positive impact.
• 76 percent say PCAOB involvement has been effective.
• 76 percent believe the requirement for companies to evaluate and disclose their internal controls and for external auditors to attest such disclosures has been positive.
• 74 percent say certification of financial reports by CEOs and CFOs has had a positive effect.


The release goes on to state, “The CAQ was created to serve investors, public company auditors, and the markets. The Center’s mission is to foster confidence in the audit process and to aid investors and the capital markets by advancing constructive suggestions for change rooted in the profession’s core values of integrity, objectivity, honesty and trust.”


I found the juxtaposition of the five 74 to 79 percent favorably cited responses and the mission of the CAQ rather interesting, and dug a little further. At the CAQ Web site thecaq.org/newsroom/release_07282007.htm,  I could access the actual survey questionnaire.


Upon examination, it was no surprise that the investors had such positive responses. They weren’t tested on their knowledge of Sarbanes-Oxley, but were polled on feelings about specifically described changes made by Sarbanes-Oxley. It’s nice to see that three-quarters of investors like apple pie and motherhood.


I wish the percentage responses for some of the other questions were given in the release, such as questions 5 and 16 reproduced below.
Q.5 Would you say the total value [of all your stocks, bonds and investment accounts] is worth?
                                                                                                          Total
$10,000 to $49,999 ....................................................................... 22
$50,000 to $74,999 ....................................................................... 11
$75,000 to $99,999 ........................................................................  8
$100,000 to $149,999 ...................................................................   8
$150,000 or more .......................................................................... 34
(Don't know) ...................................................................................    4
(Refused) ....................................................................................... 13
 Q.16 Knowing that these changes have taken place, do you have more or less confidence in audited financial information in the U.S.? Would you say you have…?
                                                                                                         Total
A great deal more confidence .....................................................  15
A little more ....................................................................................   64
A little less ......................................................................................     8
A great deal less ...........................................................................     3
(No change) ...................................................................................    8
(Don't know) ...................................................................................   2.


What did I get out of this survey? Much more than what was in the CAQ press release, and a distinctly different impression than I believe was intended. My conclusion is that only 15 percent of a very diverse investor group have a great deal more confidence in audited financial information five years after the changes made by Sarbanes-Oxley.  


I applaud the CAQ for having the survey questionnaire on their Web Site. For those interested, please read the press release and the questionnaire, and e-mail me your comments at Howard.Wolosky@sourcemedia.com with your impressions.


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