Abstract
The current research draws on the agency theory, the IT governance literature, and the executive compensation literature to present a theory of the antecedents of IT control weaknesses as reported under Sections 404 of Sarbanes-Oxley Act. More specifically, this paper examines the association between two categories of governance mechanisms (IT governance mechanisms and IT executive incentive alignment mechanisms) and the disclosure of IT control weaknesses. As for the IT governance mechanisms, the study findings indicate that a lower likelihood of disclosing IT-related control weaknesses is associated with having IT executives with higher levels of structural and expert power and having audit committee and corporate governance committee members with IT expertise. As for the incentive alignment mechanisms, the results indicate that the lower the pay disparity between IT executives and business executives in the top management team, the lower the likelihood of disclosing IT controls weaknesses.
Recommended Citation
Hamdan, Basil, "Examining the Antecedents of Sarbanes-Oxley Section 404 IT Control Weaknesses: An Empirical Study" (2011). ICIS 2011 Proceedings. 11.
https://aisel.aisnet.org/icis2011/proceedings/ISsecurity/11
Examining the Antecedents of Sarbanes-Oxley Section 404 IT Control Weaknesses: An Empirical Study
The current research draws on the agency theory, the IT governance literature, and the executive compensation literature to present a theory of the antecedents of IT control weaknesses as reported under Sections 404 of Sarbanes-Oxley Act. More specifically, this paper examines the association between two categories of governance mechanisms (IT governance mechanisms and IT executive incentive alignment mechanisms) and the disclosure of IT control weaknesses. As for the IT governance mechanisms, the study findings indicate that a lower likelihood of disclosing IT-related control weaknesses is associated with having IT executives with higher levels of structural and expert power and having audit committee and corporate governance committee members with IT expertise. As for the incentive alignment mechanisms, the results indicate that the lower the pay disparity between IT executives and business executives in the top management team, the lower the likelihood of disclosing IT controls weaknesses.