Since 2002, the popular media has anecdotally described and surveys have studied the tremendous costs of compliance with Section 404 of the Sarbanes Oxley Act of 2002 (SOX) (e.g., Cheney 2005; Wolkoff 2005; WSJ 2006). SOX Section 404 and the related PCAOB Audit Standard No. 2 (PCAOB 2004) require management to assess, and auditors to review and attest to, the effectiveness of corporate internal controls. While a substantial amount of academic research has examined the market effects of Section 404 compliance (e.g., Ogneva et al. 2006; Li et al. 2006; Cheng et al. 2006; Zhang 2006), there is currently a dearth of scientific studies that address the increased costs associated with compliance. Therefore, a primary objective of the proposed study is to empirically assess the costs and outcomes associated with SOX Section 404. Several survey studies and popular press articles have examined this subject and found that SOX 404 compliance leads to substantial increased costs. Furthermore, companies have questioned the perceived benefits of the regulation (e.g., Cheney 2005; The Economist 2005). Other popular press articles have suggested that smaller (vs. larger) companies are more adversely impacted by Section 404 (e.g., Wolkoff 2005). Lastly, no studies to date have examined whether a link exists between 404 spending and 404 outcomes (e.g., adverse internal control audit reports).