Who blows the whistle on corporate fraud?

Alexander Dyck, Adair Morse, Luigi Zingales, 19 February 2007

CEPR DP6126 studies all reported cases of corporate fraud in large companies from 1996 to 2004 and find 6% of the frauds are revealed by the SEC and 14% by the auditors. Other important sources include employees (19%), industry regulators (16%), and the media (14%). The Sarbanes Oxley Act changed the mix, but even then official investigators revealed only half the cases.

The large and numerous corporate frauds that emerged in the United States at the onset of the new millennium provoked an immediate legislative response in the Sarbanes Oxley Act (SOX). This law was created with the idea that the existing institutions designed to uncover fraud - the auditors - had failed, and their incentives as well as their monitoring should be increased.

Journalists are entitled to free DP downloads on request; please contact pressoffice@cepr.org. To learn more about subscribing to CEPR's Discussion Paper Series, please visit the CEPR website.

URL: http://www.cepr.org/DP6126
Topics: Microeconomic regulation
Tags: auditors, coporate fraud, Sarbanes Oxley Act

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