Companies Finding SOX Compliance Expensive Speak Out
Accountability is expensive. That is what companies struggling to comply with the Sarbanes-Oxley Act of 2002 are finding as many of the law’s rules take effect.
While companies complain about the cost now, advocates of the reforms say the new corporate governance and accountability rules written by the Securities and Exchange Commission will save them money later, the Wall Street Journal reported.
The new rules were written following the accounting scandals that struck Enron, WorldCom and others and are intended to reestablish investor confidence.
"We can't lose sight of the fact that we came close to an all-out breakdown of investor trust in financial statements and the integrity of the financial-reporting process," Charles Mulford, an accounting professor at the Georgia Institute of Technology, told the Journal.
The rules are coming into play at the same time companies are grappling with other rising costs in areas such as health care. Audit costs alone have increased by 30 percent in some companies working to comply with new accounting standards, even before the most expensive parts of Sarbanes-Oxley become effective.
"The real cost isn't the incremental dollars, it is having people that should be focused on the business focused instead on complying with the details of the rules," Peter Bible, chief accounting officer at General Motors Corp., told the Journal. "Everybody feels they have to do something to react to the corporate scandals, [but] you really have to scratch your head and say, 'How is this really benefiting our shareholders?' "
Public companies are also chipping in to the tune of as much as $2 million each for larger companies to pay for the new Public Company Accounting Oversight Board (PCAOB).
The Journal reported that a Financial Executives International surveyed 321 companies with more than $5 billion in revenue that expect to spend an average of $4.7 million each implementing the new 404 rule this year.
Voice of the Editor
Which isn’t completely true. I mean, occasionally I drop by when I manage to sneak out of the nonstop frat party over at Going Concern, but I’m mostly a wallflower over there. I’m happy to say that I’ve been given express permission (or explicit orders, if you like) to wander over here to AccountingWEB more often.
Why is that, you might ask? My job is to replace the irreplaceable Gail Perry as Editor-in-Chief. What does that mean? I don’t really know! I think it’ll be fun getting a feel for things, throwing in my own thoughts here and there, and listening to the discussions you’re having about the accounting profession.