The Sarbanes-Oxley Act (SOX) continues to pose fresh challenges as cost of compliance increases, according to a SOX Compliance Survey of 300 executives conducted by consultancy firm Protiviti.
The survey found that, whilst the cost of compliance has increased in many cases, these costs remained manageable, and found that the vast majority of firms had improved their internal control structures since SOX was introduced.
A total of 38% of companies reported SOX related costs increased between 2012 and 2011, with 87% of these reporting that the increase was greater than the rate of inflation.
Of the 38% who reported cost increases, a further 42% said the increase was 15% of greater.
Over a quarter (26%) said that if SOX Section 404(b) was not required, they believed external audit fees would decrease over 20%, which was the same percentage who felt it would stay the same.
SOX Section 404(b) requires US listed companies to implement and report on internal controls, and have these reports audited.
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By GlobalDataHowever, Protiviti found that compliance costs remained manageable for companies, noting they were not "extraordinarily high relative to the objective of quality financial reporting to investors through improved internal controls."
Furthermore, 26% of companies felt that their financial reporting structure had significantly improved since SOX Section 404(b) was introduced, with a further 38% reporting moderate improvements.
Protiviti found the majority of companies were tightening the overall scope and reducing the number of controls of their compliance programs, and predicted a rise in the number of continuous monitoring tools or techniques over the coming years.
There was also a worrying trend in respondents not being up to date with some of the latest regulations, with 61% of respondents saying they had not read the Public Company Accounting Oversight Board’s (PCAOB) latest guidance on audit committees on the inspection process, with the same numbers saying their audit committee had not discussed it.
Similarly, 49% said they had not read the PCAOB’s Auditing Standard 16 – Communications with Audit Committees, with 48% saying their audit committee had not read it.
Protiviti surveyed 300 executives and professionals at companies with gross annual revenue of between under $100m and over $10bn.
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