Sarbanes-Oxley Section 404 compliance cost corporate america less in year two of adoption than in year one, according to a survey released today by Financial Executives International (FEI).
FEI polled 274 public companies, of which 238 are “accelerated filers” according to SEC definitions and have average revenues of $6 billion, to gauge experiences in complying with Sarbanes-Oxley’s Section 404. This is the fourth SOX compliance survey FEI has conducted since 2004.
According to the FEI survey, the accelerated filers’ total average cost for Section 404 compliance was $3.8 million during fiscal year 2005, down 16.3% from 2004. The data shows that many of these reductions can be attributed to lower staff and consultant time and reduced auditor fees, including the following 2005 vs. 2004 comparisons, in which the internal staff time decreased 11.8%; external costs, including software and consultant fees, but excluding primary auditor fees, fell 22.7%; and auditor attestation fees dropped 13%.
Despite the decreases in these overall Sarbanes-Oxley 404 costs, 85% of companies still do not believe that the benefits of compliance with Section 404 have exceeded the costs.
“We’ve made strides during the second year of Section 404 implementation, but there is still room for improvement. Based on the feedback from our members, it is clear that the degree of documentation is the number one issue,” said FEI President and CEO Colleen Cunningham. “While an overall decline materialized, the decline was less than anticipated compared to an expectation by most companies surveyed by FEI last year.”