An average company wasted $1.7 million on SOX 404 Compliance last year

Financial Executives International polled companies for the 7th year in a row to determine how much it costs to comply with Section 404 of the Sarbanes-Oxley Act. This year, they talked to 185 companies with average annual revenues of $4.7 billion.

The total average cost of compliance was $1.7 million in 2007. This is a decrease from the prior years.

The survey also asked “accelerated filers” (companies with market capitalization above $75 million) about their audit fees for 2007. The total audit fees for these companies averaged $3.6 million, up a bit from 2006.

Read moreAn average company wasted $1.7 million on SOX 404 Compliance last year

Sarbanes-Oxley Five Years Later

This week’s Wisconsin Law Journal column takes a look at the Sarbanes-Oxley Act of 2002, which was put into law five years ago. The legislation has done some good things, but many have significant criticisms of it. The law was intended to protect retail investors in public companies by bringing certain standards to the financial reporting process.

Sarbox requires executives to certify financial results and be held accountable for the accuracy of financial data. The legislation also attempted to bring more transparency to the independent audit process.

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5 Years of Sarbanes-Oxley

That’s right. We are fast approaching the 5 year anniversary of the passing of the Sarbanes-Oxley Act of 2002. Who’s celebrating? Well surely the consultants and accountants who have made a fortune off SOX consulting are celebrating a bit.

Over at Audit Trail, they have some surprising results of a survey of public companies. The results are surprising to me because I generally believe that the cost of Sarbanes-Oxley has far outweighed the little benefit that has been gained. Yet executives apparently think SOX has been positive:

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Possible Changes to Sarbanes-Oxley Within the Next Year

The Securities and Exchange Commission voted in favor of four staff recommendations to work with the Public Company Accounting Oversight Board (PCAOB) to help change Sarbanes-Oxley. Currently, Sarbanes-Oxley requires companies to monitor and test internal controls over financial reporting. (Notice I didn’t say the company actually has to have good internal controls. As long as … Read more Possible Changes to Sarbanes-Oxley Within the Next Year

Some Basics About Sarbanes-Oxley

Say it fast five times: Sarbanes-Oxley, Sarbanes-Oxley, Sarbanes-Oxley, Sarbanes-Oxley, Sarbanes-Oxley… If you’re like me, you’re sick of hearing these words.

Lots of people, however, don’t have the first idea what the Sarbanes-Oxley Act of 2002 is really about. I think the public-at-large thinks it’s legislation that stops fraud. That couldn’t be further from the truth.

It is true that Sarbanes-Oxley (also fondly referred to as SOX or SarbOx) was meant to protect investors in public companies. It set forth some standards and certain procedures that public companies are required to abide by.

But the legislation itself requires far less than many people believe it does. At the end of the day, the regulations require companies to document their processes and disclose whether or not their internal controls are working. It doesn’t actually force them to materially improve the internal controls. (See my article What Has Sarbanes-Oxley Done For You Lately? for more of my opinions on this.)

So what does Sarbanes-Oxley require?

Read moreSome Basics About Sarbanes-Oxley