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Capitol Report: Executives and directors are insider trading on advance knowledge of audit issues, new study finds

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The U.S. Securities and Exchange Commission seal

Corporate executives and directors are trading on inside information about potential audit findings in the window between year-end earnings announcements and when companies file annual reports and audit opinions with the Securities and Exchange Commission, according to new research.

Companies didn’t use to announce fourth-quarter earnings until the auditors’ work was done and the annual report with its opinion was issued. Since 2004, however, after new audit requirements were mandated by the Sarbanes-Oxley Act as a result of the failure of Enron and the dissolution of its audit firm Arthur Andersen, audits are taking longer to finish.

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