Senior executives at U.S. multinational companies are somewhat divided over the financial impact of complying with the Sarbanes-Oxley Act of 2002.

According to a recent survey by PricewaterhouseCoopers, 56 percent of surveyed executives said initial compliance with Sarbanes-Oxley was not very costly for their company, while the remainder claimed compliance was at least "somewhat" costly.

The overall breakdown was as follows:

12 percent — Not costly at all

44 percent — Not particularly costly

39 percent — Somewhat costly

  5 percent — Very costly

Surveyed executives said they expect costs to increase by an average of 4.1 percent in the second year, and decline by an average of 2.5 percent thereafter.

The Smaller, The Harder

As expected, smaller companies with revenues under $1 billion felt harder-hit than larger ones.

58 percent of small company executives said compliance was costly, compared with just 38 percent of executives at companies of over $1 billion.

"Larger companies with a well-established corporate reporting infrastructure are better able to handle the added certification and disclosure requirements of the new law," says Frank Brown, global leader of PricewaterhouseCoopers' Assurance and Business Advisory Services.

Where The Costs Are

According to the survey, 76 percent of the cost of Sarbanes-Oxley compliance is for added internal resources, and 24 percent for external assistance.

A majority of executives listed several aspects of compliance as being at least "somewhat costly," including the following:

74 percent — Documentation

72 percent — Legal requirements

65 percent — Detailed policy development

62 percent — Self-assessment

59 percent — Attest requirements and certifications

56 percent — Staff training

41 percent — New tools and technology.

According to Brown, the numbers imply that costs aren't necessarily associated with corporate systems upgrades, but rather codifying policies and procedures. "Much of the cost of complying with Sarbanes-Oxley lies in gathering and certifying information," he says.

Where The Costs Are Going

In the second year, executives surveyed expect the costs of compliance to rise slightly by approximately 4.1 percent:

37 percent — Anticipate an increase

22 percent — Anticipate a decrease

But over the longer term, executives expected costs to stabilize:

44 percent — Stay the same

28 percent — Decline

24 percent — Increase further

  4 percent — Uncertain

 

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