An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Rajendra P Srivastava
University of Kansas

Lili Sun
Rutgers University - Newark

Theodore J Mock
University of Southern California

Miklos Vasarhelyi
Rutgers University

David Vun Kannon
PricewaterhouseCoopers

Abstract: In response to the requirements of the Sarbanes-Oxley Act 2002, this study develops an evidential reasoning approach for assessing the effectiveness of internal controls over financial reporting (ICoFR). This approach provides a structured methodology for assessing the effectiveness of ICoFR by considering all the relevant factors and their interrelationships using the Dempster-Shafer theory of belief functions for representing uncertainties. We develop a quantitative representation of various levels of ICoFR effectiveness as defined by Public Company Accounting Oversight Board. Furthermore, we develop a generic ICoFR assessment model based upon a Big 4 firm’s approach and apply it to a real-world example.

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