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Compliance: Nine years of Sarbanes-Oxley
Nine years after the Senate merged their “Public Company Accounting Reform and Investor Protection Act” with the House’s “Corporate and Auditing Accountability and Responsibility Act”, the law remains a center of debate. July 30th marked the 9 year anniversary of SOX. The Sarbanes-Oxley Act requires publicly-traded companies to assess the quality of their internal controls and then have auditors review the adequacy of their assessment. This part of the code, known as Section 404, causes much pain for companies to implement. Some of the pain has been eased by the fact that recently the Public Company Accounting Oversight Board clarified the rather murky requirements of the original language of SOX. Despite the continued debate and complaints about the costs of implementation, surveys have found that overall Sarbanes-Oxley has been effective. A recent survey by Privoti, a risk and business consulting company, found the following results:
- Companies now have a good understanding of the requirements of SOX and now most organizations are able to handle compliance activities in-house.
- Most companies outsource compliance activities during year one of implementation, but this is reduced in later years as the process becomes more routine.
- While initial implementation of SOX can be expensive, with a large percentage of costs funding outsourced resources, compliance costs by year four are less than half of the cost for the first year of implementation
- Many companies gradually automate their compliance activities, allow them to further reduce costs
- On average, organizations are spending $100,000 to $1,000,000 annually to maintain compliance
A parallel report by Financial Executives International (FEI) found that compliance costs reported by companies have stabilized. Most companies now report spending differences from the previous year for compliance to be in the range of 2 percent.
