An evaluation of the Sarbanes-Oxley Act's impact on accounts payable and leadership effectiveness

In 2002, a radical change occurred within the public accounting arena when Congress passed Public Law 107-204, the Sarbanes-Oxley (SOX) Act. Now faced with greater accountability and personal risk for acts of corporate malfeasance, leaders of publicly traded companies are taking a much closer look at internal company controls over balance sheet accuracy. Since the passage of the 2002 SOX Act, all publicly traded/owned companies are required to increase internal efforts to ensure greater controllership over financial statement accuracy. Finance leaders of these publicly traded companies have struggled with determining if their efforts to increase internal controllership over financial statements were effective. The purpose of the current study, then, was to analyze the impact that the 2002 SOX Act has had on the effectiveness of leadership oversight and responsible handling of the accounts payable processes. The results of this current study indicate that there has been in increase in controllership and corporate governance activities associated with accounts payable processing. Additionally the study results indicate that there is more scrutiny by public company leadership teams in ensuring that the current liability portion of the balance sheet accurately reflects the financial integrity of the company. The current study also suggested that the settlement accuracy of accounts payable processes could be measured and subsequently reproduced in order to provide a real-time indicator of the accuracy of accounts payable processing activities. Finance leaders may be able to generalize the accounts payable results contained within the current study to develop indicators for determining whether other balance sheet categories are performing in a manner that will ensure controllership and corporate governance criteria illustrated in the SOX Act.