We investigate whether firms who voluntarily drop compliance with Section 404(b) of Sarbanes–Oxley (SOX)—the requirement to have an outside auditor conduct an audit of internal control over financial reporting—suffer a loss of earnings informativeness. Section 404(b) has been widely criticized for imposing costs in excess of the benefits to investors. Calls for wholesale repeal and increasingly wide exemptions from compliance continue to this day. The fact that non‐US regulators have not passed similar regulation outside of the USA appears to be partially driven by similar cost concerns. Our results indicate that voluntary dropping of 404(b) is associated with a drop in earnings informativeness. This result is driven primarily by financially distressed companies. Our results address previous calls for research about the market's perception of 404(b) compliance and suggest that regulators may wish to consider firm characteristics when determining which firms should be required to purchase an audit of internal control over financial reporting.

中文翻译：

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《萨班斯法案》第404（b）条的免除对收益信息的影响

我们调查了自愿放弃遵守《萨班斯法案》（Sarbanes-Oxley（SOX））第404（b）节（要求聘请外部审计师进行财务报告内部控制审计）的公司是否遭受损失了收益信息的行为。404（b）节因向投资者施加超出收益的成本而受到广泛批评。要求全面废除和越来越多的豁免遵守法规的呼吁一直持续到今天。非美国监管机构没有通过美国以外的类似法规的事实似乎部分是由类似的成本问题驱动的。我们的结果表明，自愿删除404（b）与收益信息减少有关。这一结果主要是由财务困难的公司推动的。我们的结果满足了之前有关市场研究的呼吁。