Even at a lower cost, Sarbox is not worth it. So say corporate managers surveyed by Financial Executives International, a U.S. trade group. Polling 200 companies with average revenues of $6.8 billion (including 172 “accelerated filers,” or companies with market capitalizations above $75 million), FEI found that the financial burden of complying with Section 404, a critical feature of the Sarbanes-Oxley Act, fell drastically in the third year of implementation. The average sum shelled out to adopt 404 — which requires companies to assess their internal controls over financial reporting and publish the findings — dropped 23 percent in 2006, to an average of $2.9 million. FEI attributes the decline to companies’ increased efficiencies, a positive learning curve and the rolling out of key technical systems. Oddly, the survey also found that the fees paid to auditors fell less than 1 percent, to an average of $1.2 million paid by accelerated filers. “I was surprised,” says Grace Hinchman, senior vice president at FEI. “Based on the tenure of the relationship between management and auditor, I thought it would yield more cost savings.” Hinchman also didn’t expect 78 percent of respondents to say that the costs of compliance have exceeded its benefits. “That struck a chord,” she says.
