ABSTRACT: Accounting professionals, researchers, business leaders, and government officials have called for reform of the Sarbanes‐Oxley Act of 2002. Critics question both the substance of the law and the legislative process by which it was enacted. Criticism of the process challenges whether the congressional hearings and other legislative steps that led to enactment of the bill were balanced and thorough, or whether political drivers made quick passage an imperative for lawmakers regardless of the merits of the legislation.

This paper examines the congressional hearings in the context of a single provision of the Act: the ban that prohibits accounting firms from providing internal audit services to their external audit clients. We identify the arguments for and against the ban, and we examine the role these arguments played in the testimony that witnesses provided to the House and Senate committees most responsible for the legislation. We find that witnesses offered strong arguments both for and against the ban, and that lawmakers were well informed. We conclude that a reasonable person, listening to the testimony, could easily decide to support the ban. The evidence fails to support a prima facie assertion that the ban lacks merit, or the claim that it must have been politically motivated.

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