As the CFO, exactly how much capital did you put aside to cope with the compliance costs for Section 404 of the Sarbanes-Oxley act? The capital almost certainly isn?t enough. That?s the conclusion from a recent survey by the Financial Executives International (FEI) showing costs for compliance are more than 60% higher than estimates made only six months ago. The total cost of compliance for the average company in FEI?s July survey amounts to $3.14 million; a rise from $1.93 million in the FEI?s January survey.
This 62% increase is linked to three factors: a 109% increase in internal costs, a 42% rise in external costs and a 40% increase in fees charged by external auditors. The rise in costs for external auditors is proving particularly irksome for corporates.
?Audit firms have been entrusted to deliver value from Section 404,? comments Colleen Sayther, president and CEO of FEI. ?They have latitude in terms of the scope and depth of their work and should exercise care and judgement, and be cognisant of the cost-to-benefit ratio.
?However, compliance alone cannot be expected to produce higher levels of accountability or deter those from acting without integrity.