On average, public companies expect to spend more than 6,000 hours – a total that includes internal resources, external resources and attestation time – and an additional $480,000 in software and IT consulting on Sarbanes-Oxley Section 404 compliance. Most of the rising costs are directly related to the extra hours accountants must spend making sure companies comply with the stringent new regulations, according to a study of 83 public Financial Executives International (FEI) member companies with average revenues of $3.3 billion.
Section 404 requires among other things:
- each annual report of a company to contain a statement of management’s responsibility for establishing and maintaining an adequate internal control structure and procedures for financial reporting
- management’s assessment, as of the end of the company’s most recent fiscal year, of the effectiveness of the company’s internal control structure and procedures for financial reporting.
The company’s auditor must attest to and report on management’s assessment of the effectiveness of the company’s internal controls and procedures for financial reporting, in accordance with standards established by the Public Company Accounting Oversight Board (PCAOB).