With the economy still reeling from the string of recent
business accounting scandals highlighted by the $7.2 billion
accounting fraud at WorldCom, the Securities and Exchange
Commission has begun implementing the Sarbanes-Oxley Act, intended
to create better corporate governance. Among other things, the new
law requires the creation of a five-member Public Company
Accounting Oversight Board, responsible for regulating the
accountants who audit public companies. It also expands the
definition of obstruction of justice and increases maximum
sentences for those who violate securities laws.
A July 26-28 Gallup survey* shows that a majority of Americans
(63%) say they are "not too confident" (41%) or "not at all
confident" (22%) that an accounting firm's audit of a major
corporation will be accurate. Roughly a third of the American
public (35%) expresses confidence that such audits yield accurate
results, with just 3% giving "very confident" as their response.
These findings are significantly more negative than when Gallup
first asked about accounting accuracy in February 2002 and
represent a shift in attitudes. At that time, 56% expressed
confidence in the accuracy of accounting audits and 42% said they
were not confident.
Older Americans are more likely than younger Americans to be
skeptical of audit accuracy. More than four in 10 18- to
29-year-olds (44%) express confidence in corporate accounting
accuracy, compared to 40% of 30- to 49-year-olds, 28% of 50- to
64-year-olds and just 19% of those aged 65 and older. Republicans
are also more confident than Democrats, by a margin of 46% to
27%.
The general lack of public confidence indicates a call for
reform. The scale on which the public expects changes to be made is
startling. The same July 2002 survey found nearly a third of the
public (28%) saying that there should be a complete overhaul of the
way large corporations are audited. An additional 43% believe major
reforms are needed. Two in 10 Americans (22%) say minor reforms are
needed and just 3% think no reforms are necessary. Again, the July
results represent growing public concern about this issue, as just
17% thought a major overhaul was necessary in February.
The same age and party differences persist regarding reforms.
Just 10% of 18- to 29-year-olds think a complete overhaul of
corporate auditing practices is required, compared to 26% of 30- to
49-year-olds, 35% of 50- to 64-year-olds, and 43% of those aged 65
or older. Among Republicans, 23% call for a complete overhaul,
compared to nearly four in 10 Democrats (39%) who think such an
extreme measure is necessary.
Key Points
Gallup polling indicates that the reforms being implemented in
response to the Sarbanes-Oxley Act are coming not a moment too
soon. The public has little confidence in the ways that large
corporations are audited and has called for major reform. Whether
the Sarbanes-Oxley Act will go far enough to relieve the public's
worries about corporate auditing remains to be seen.
*Results based on telephone interviews with 1,004 national
adults, aged 18 and older, conducted July 26-28, 2002. For results
based on the total sample of national adults, one can say with 95%
confidence that the maximum margin of sampling error is
±3%.
