SOX Center

While Sarbanes-Oxley Act compliance costs decreased overall in 2006, the out-of-pocket costs associated with compliance rose from 2005 to 2006, according to a study planned for release on Thursday.

Foley & Lardner’s fifth annual study measuring the financial impact of Sarbanes-Oxley on public companies finds that the cost of audit fees, board compensation, and legal fees continue to rise, despite an overall plateau in compliance costs that companies tend to see following initial implementation of Section 404 financial controls.

The burden of compliance is prompting an increasing number of respondents at the 93 public companies surveyed to consider going private or selling the company. This year, 23% of those answering the survey said they’re considering transactions to take their company private, 16% said selling their company was a possibility, and 14% said they were considering a merger.

esm.com: Sarbanes-Oxley drives away IPOs

Two more UK companies have announced they will delist their shares from the New York stock market to avoid the burden of complying with legislation such as the Sarbanes-Oxley Act.

Both United Utilities and ICI expect to cut their compliance costs by millions of pounds a year by dropping their secondary listings in the US.

Warrington-based United Utilities, which operates electricity and water networks, said today it was running up “significant costs” by complying with the US Securities Exchange Act and Sarbanes-Oxley.

Business Guardian: United Utilities and ICI drop New York listings

The financial burden of Sarbanes-Oxley Act (SOX) compliance is slowly, but surely starting to ease.

The cost of compliance with Section 404 of the SOX declined by 23% in fiscal 2006, according to a survey by Financial Executives International.

The Florham Park, New Jersey-based organization found the average company spent $2.9 million on SOX compliance in 2006, versus $3.8 million in 2005 and $4.5 million in 2004.

“Technology has a lot to do with the cost reduction,” said Sanjay Anand, chair of the Sarbanes-Oxley Institute. Public companies “are actually automating their controls. A good 20 to 30%, even as much 40%, of the cost reduction is actually coming from automated controls rather than manual controls.”

These cost reductions have come despite the fact that auditors’ fees have remained relatively steady, the research revealed. External auditor fees dropped by just 11% in 2006, from $1.35 million to $1.2 million.

ComputerWeekly: Sarbanes-Oxley compliance costs drop, better processes credited

Few Give Stock Options a Second Look ATLANTA–(BUSINESS WIRE)–Oversight Systems Inc. today released the results of the 2007 Oversight Systems Financial ExecutiveReport on Sarbanes-Oxley. The survey of 168 financial executives identifies growing benefits of continuous monitoring, improved management of year-three compliance costs and a positive jump in shareholder value.

The 4th annual survey found financial executives were bullish on the use of continuous monitoring in Sarbanes-Oxley (SOX) compliance, have begun to reign in the costs of year-three compliance, recognized a bump in shareholder value and report a risk-based approach to 2007 compliance.

Nearly two-thirds of financial executives (64 percent) see merits in using continuous monitoring as a detective tool in SOX compliance. Additionally, 58 percent feel it can serve as a preventative tool, 50 percent think it can facilitate management’s assessment of risk and help test the effectiveness of other controls, and 42 percent believe it can be used as a compensating or mitigating control.

Download the complete survey report

Yahoo!Finance: Oversight Systems 4th Annual SOX Survey Finds Financial Executives Hail Prospect of Continuous Monitoring, Bullish on Lower Compliance Costs

The much maligned new rules are a big hit with investors

There has been no shortage of public outcry over Sarbanes-Oxley, the controversial 2002 accounting reform legislation that requires top corporate executives to fill out reams of new forms and personally certify their financial reports. SarbOx, say its critics, adds millions in compliance costs, makes life miserable for corporate directors, and encourages companies to bolt to foreign stock exchanges. The complaints have been so passionate that regulators are now planning to loosen the rules, probably before the year is out.

Not so fast, says a growing chorus of investors. Lost amid all the boos over SarbOx, they say, are some major benefits. The biggest: SarbOx and related reforms have produced much more reliable corporate financial statements, which investors rely on when deciding whether to buy or sell shares. For them, SarbOx has been a godsend.

What’s more, says Duncan W. Richardson, chief equity investment officer at Eaton Vance Management and overseer of $80 billion in stockholdings, even the act’s much disparaged requirements for testing internal financial controls could drive gains in corporate productivity and profits. Says Donald J. Peters, a portfolio manager at T. Rowe Price Group: “The accounting reforms have been a win.”

BWonline:Not Everyone Hates SarbOx