Companies Pushing For Lower Audit Fees for 2005
The internal control requirements of the Sarbanes-Oxley Act forced many companies to spend more than twice what they budgeted last year, so they're looking to pay far less this year, according to a study given to Reuters by CFO Executive Board, a division of Washington research group Corporate Executive Board Co.
Section 404 of SOX requires that the companies' external auditors produce details of their internal controls and how those controls will combat fraud by next month. At the beginning of last year, the study said that most companies figured the cost of Section 404 would amount to between 20 percent and 60 percent of what they normally paid in annual audit fees, but the real figure was between 60 percent and 120 percent.
Executives say that auditors were charging by the hour last year instead of by the job, a practice they attributed to some of the additional cost. AMR Research says U.S. corporations will spend more than $11 billion between 2004 and 2005 on Section 404.
The study said companies are now seeking to keep their fees this year at between 20 percent and 80 percent of annual audit fees. "CFOs are hoping to reduce their SOX costs in year two by capitalizing on any sort of efficiencies to be gained in the documentation and testing process, or perhaps even a reduction in their overall scope of testing," said Kurt Reisenberg, managing director of the CFO Executive Board.
Overburdened small companies have told the Securities and Exchange Commission that complying with Section 404 has been too time-consuming and expensive. The SEC has scheduled a conference on the issue in April.