SOX Costs Now ...................................................................................
In the early years, SOX cost. Now, SOX still costs, but a study commissioned
by Financial Executives International (FEI) shows that the SOX-related costs
are coming down. FEI surveyed 172 companies with a market capitalization
above $75 million and found that in 2006, SOX-related costs came down 23
percent. Employee hours spent on compliance came down 10% from 2005 to
2006, while external hours (by auditors) decreased 14 percent. The survey
also found that:
Compliance costs were cheaper for companies with centralized opera-
tions than for those with decentralized.
Twenty-two percent of respondents feel the benefits of compliance out-
weigh the costs (up from 15 percent in 2005).
Sixty percent agree that compliance has improved investor confidence.
Forty-six percent say financial reports are more accurate, while 48 percent
say financial reports are more reliable.
Thirty-four percent agree that compliance has helped prevent or detect
fraud.
Chances are good that complying with SOX is going to cost you a lot, but not
as much as it would have cost you if you were becoming SOX-compliant in
- The range of software vendors offering products to help you automate
your internal controls has grown exponentially since then. Independent audi-
tors have had a few years to absorb what they have to do. The SEC has clari-
fied its requirements. A few years ago, the experts were all fumbling around
in the dark, but they have seen the light. Their clarity will help you become
SOX-compliant faster, better, and cheaper than your predecessors on the
stock market in the prehistoric days of 2002.
Setting the Record Straight .........................................................................
Up to 5 percent of companies on the U.S. Stock Exchange have restated their
financials since SOX. Auditors’ thresholds for materiality are much lower,
even when just looking at the numbers. If there are errors in previous years,
or big mistakes such as the backdating of stock options, you will have to
restate your previous financials. By facing the mistakes, you are saying to
investors, “We did wrong, but we are willing to admit it and fix it.”
Chapter 4: How Sarbanes and Oxley Changed Our Lives 101
