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Compliance: Pain Easing?
The first three years after the enactment of Sarbanes-Oxley were painful and expensive ones, but the pain seems to be easing. Grappling with what it all meant and paying to build the infrastructure to support the requirements wasn’t easy in the early going.
Over the last year though, SOX costs are down or flat and companies have moved on to other more pressing problems.
Financial Executives International compared SOX costs over the past four years and found that for companies with over $75 million in capitalization that SOX costs in 2007 related to section 404 averaged $1.7 million.
Costs declined in the following areas:
- The number of staff work hours spent achieving compliance declined 8.6 percent from 2006
- The number of hours from external workers declined 13.7 percent
- Audit fees, which account for nearly a quarter of SOX compliance costs, dropped 5.4 percent
Those companies using centralized accounting are seeing the greatest savings — more than 30 percent cost efficient as compared to operations with decentralized management.
And many companies are beginning to see the benefits of achieving compliance:
- 50.3 percent say that their accounting is more accurate
- 50.6 percent say that their accounting is more reliable
- 43.6 percent say that SOX is helping them to prevent fraud
- 69.1 percent say that the measures have increased investor confidence in their operations
So while SOX still presents a barrier to companies faced with the challenge of achieving compliance, once the controls are in place, additional SOX accounting costs tend to decrease as compliance begins to become second nature. And companies then begin seeing the benefits.
