Compliance cost estimates appear drawn along company size lines, with more executives at smaller companies – those with total revenues under $1 billion – perceiving compliance as costly than those at larger firms. At smaller companies, more than half (58%) said compliance was costly, compared with just 38% of executives at companies with revenues exceeding $1 billion, according to PricewaterhouseCoopers Management Barometer as reported by SmartPros.
“How companies view the added administrative cost of complying with the new law appears to be a function of size and preparedness,” said Frank Brown, global leader of PricewaterhouseCoopers’ Assurance and Business Advisory Services. “Larger companies with a well-established corporate reporting infrastructure are better able to handle the added certification and disclosure requirements of the new law. For smaller companies, compliance has been more of a burden.”
More than three-quarters (76%) of the cost of Sarbanes-Oxley compliance is for added internal resources, and 24% for external assistance. A majority of executives listed several aspects of compliance as being at least “somewhat costly,” including:
- Legal requirements;
- Detailed policy development
- Attest requirements and certifications
- Staff training.
- 41% expect the cost of compliance will stay about the same in the second year as in the first year;
- 37% anticipate an increase, and
- 22% foresee a decrease.
Overall, compliance costs are expected to rise by an average rate of 4.1%. Product sector companies expect costs to rise 6.6%, while service businesses predict no change in costs.
Executives said the total costs for Sarbanes-Oxley control and compliance are expected to average 10.4% of their management controls budget over the next two years. However, a high proportion (42%) of survey respondents said they could not estimate the costs.