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Observed Effectiveness of the COSO 2013 Framework

Sat, April 21, 11:15am to 12:30pm, Hyatt Regency Greenville, TBA

Abstract

This paper examines the effect of the COSO 2013 Framework on the number and likelihood of auditor reported material weaknesses. The paper uses two regression models, and a sample of 2,483 U.S. firms subject to Section 404(b) of the Sarbanes-Oxley Act (SOX) of 2002 requirement to examine the effect of the COSO 2013 Framework. The results show that firms that adopted the 2013 Framework are less likely to experience instances of material weaknesses, and that the likelihood of identifying material weaknesses increased in the post-2013 Framework period. Thus, the COSO 2013 Framework has the potential to further enhance internal control over financial reporting. This paper is one of the very few to investigate the COSO 2013 Framework, beyond its content, and to provide evidence of the 2013 Framework’s potential to enhance internal control over financial reporting. The findings provide credibility to notions about the COSO 2013 Framework being more comprehensive.

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