Overall expenses fell by 6% for large companies and by 16% for medium and small firms, but audit fees rose by 22% for small businesses. According to estimates by the InfoWatch analytical center, next year will see further reductions in the cost of SOX compliance despite the possibility of an increase in audit fees.
The overall cost of complying with the Sarbanes-Oxley Act (SOX) in 2005 fell by 6% for companies with revenues exceeding $1 billion, and by 16% for firms with revenues of less than $1 billion. However, the cost of audit fees, which is one component of the overall compliance cost, rose 22% in 2005 for small companies, 6% for midsized companies and 4% for Standard and Poor's 500 companies, according to a survey by Foley & Lardner.
The authors of the report noted that audit expenses accounted for more than 50% of the total costs of SOX compliance for companies with revenues of less than $1 billion. Last year that figure stood at just 33%.
Commenting on the survey, analysts concluded that companies managed to reduce the cost of compliance through decreases in the costs associated with lost productivity, legal fees and initial corporate governance reform set-up.
The study was based on data from more than 850 proxy statements from public companies’ 2005 fiscal year and responses from CEOs and other top executives of 114 public companies.
“A fall in the costs of SOX compliance was predictable. In the first year senior managers were prepared to spend anything just to obey the law. Now, however, the expenses are leveling out, the different stages of SOX are being applied efficiently and companies are learning to create rational internal control mechanisms. I’m sure that next year we will see another reduction in the costs, even if there is a rise in audit fees,” believes Denis Zenkin, marketing director at infoWatch.
Source: pionline.com
