SOX Compliance Costs Rising for Companies, Study Finds

The finance costs for public companies to comply with the Sarbanes-Oxley Act is rising, according to the Hackett Group’s 2007 Finance Book of Numbers, reports Andrew Osterland of Financial Week.

The Book, an annual benchmarking study that analyzes the efficiency and effectiveness of corporate finance departments, found that after nearly a decade of cost reductions in finance, the average “global 1000” company spent 12 percent more last year on its finance function than three years ago, according to Financial Week. Compliance-related activities were seen as the biggest driver of the increased cost.

“We expected costs to back off from where they were, but they’re not coming down,” Bryan Hall, a managing director and practice leader of the finance executive advisory program at Hackett, told Financial Week.

Additionally, the compliance cost-efficiency gap between “world-class” organizations - including the top 22 performers of the 220 companies studied – and the rest of the group is widening, according to Financial Week. Companies like Alcoa Dow and General Electric on average spent 47 percent less on external audit fees than their peers, and operated with 44 percent fewer compliance staff.

Meanwhile, law firm Foley & Lardner’s fifth annual survey of the costs of being a public company found that fees paid to external auditors for all sizes of companies in 2006 were four percent higher than in 2005, and were an astonishing 271 percent higher than in 2001, the year before SOX was passed, according to Financial Week.