The scrutiny auditing received following Enron's failure and the accounting scandals at Worldcom and other companies provides compelling evidence that auditing matters and is important. What is unclear, however, is whether auditing was sufficiently “broken” in the first place to warrant the radical reforms and changes effected by the Sarbanes‐Oxley Act of 2002 (SOX). While there have been some high profile corporate failures and accounting scandals, the number of demonstrated audit failures as evidenced by successful litigation or U.S. Securities and Exchange Commission (SEC) sanctions is quite small and approaches an annual failure rate of close to zero. In addition, our interpretation of the academic research suggests that many of the “solutions” embodied in SOX are not only unlikely to solve the profession's alleged problems; they may well have serious unintended negative consequences. So the disconnect is large between the scientific evidence on audit quality and institutional changes premised on the assumption that auditing is broken. This paper attempts to stimulate research into some of the important questions implicitly raised by SOX regarding the audit profession's potential failings. An outline of our primary observations and suggestions are presented in the paper's Introduction.

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