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Sarbanes-Oxley Compliance Costs Exceed Estimates

Sarbanes-Oxley Compliance Costs Exceed Estimates

by Rick Turoczy on March 21, 2005

Public companies have had to dig even deeper than previously estimated to pay the costs of complying with Section 404 of the Sarbanes-Oxley Act, according to a just-completed survey by Financial Executives International (FEI). FEI is the leading professional organization of Chief Financial Officers (CFOs) and other senior financial executives.

Companies’ total costs for year one Section 404 compliance averaged $4.36 million, up 39 percent from the $3.14 million they expected to pay, based on FEI’s earlier July 2004 cost survey. The increase stems largely from a 66 percent leap in external costs for consulting, software and other vendors and a 58 percent increase in the fees charged by external auditors.

With March 16 as the general deadline for public companies to complete an assessment of their internal controls over financial reporting, FEI recently surveyed 217 public companies with average revenues of $5 billion to gauge Section 404 compliance costs. Their total cost of compliance averaged $1.34 million for internal costs, $1.72 million for external costs and $1.30 million for auditor fees. The auditor fees are in addition to companies’ financial statement audit fees, on average 57 percent higher. (See http://www.fei.org for more details.)

Sarbanes-Oxley Compliance Costs Exceed Estimates

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