Financial Services Spend More than $1M Annually on SOX

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Terry Sheridan
Columnist
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The financial services industry, accounting included, is among the bulk of businesses spending more than $1 million annually on Sarbanes-Oxley (SOX) compliance requirements, according to a new annual survey by global consultancy Protiviti.

At $1.23 million in average annual internal costs, excluding external audit fees, financial service firms are among 10 of the 21 industries surveyed that spend $1 million to $1.5 million on SOX requirements. In addition, nine spent less than $1 million while government weighed in at $1.64 million and healthcare payers at $2.31 million.

External audit fees also increased for half of all large accelerated and accelerated filers, and more than half of public companies. But most companies in the $500 million to $999.99 million revenue range saw a decrease, as did non-accelerated filers and emerging growth organizations.

Results are based on responses from about 1,500 respondents who answered an online survey early this year. More than half (54 percent) of the respondents were public companies; 14 percent were in financial services. The greatest percentages of respondents indicated they were chief audit executives, audit managers, audit staffers or business unit control leaders.,

Overall, Understanding the Costs and Benefits of SOX Compliance indicates that the majority of organizations in all revenue categories from less than $100 million to $20 billion or more have seen more than a 10 percent increase in time spent on SOX compliance.

For public companies, time spent on compliance requirements increased 55 percent and rose 22 percent for those that were private but planning an initial public offering (IPO); private companies spent 29 percent more time. Interestingly, while companies facing their pre-first year of compliance saw time spent increase the most, only 11 percent of those in their second year reported spending more time. But almost half (45 percent) beyond their second compliance year spent more time. That could be because implementing the internal control framework of the Committee of Sponsoring Organizations of the Treadway Commission ate up more time, the report states.

“Companies understandably would prefer to spend less time and money on their compliance efforts, but the Sarbanes-Oxley Act was created to improve the quality and reliability of internal control over financial reporting structures in organizations,” said Brian Christensen, Protiviti’s executive vice president and head of its global Internal Audit and Financial Advisory practice, in a prepared statement.

Here’s a sampling of the survey’s takeaways:

  • In 85 percent of public companies, either the audit committee or executive management is the executive sponsor for SOX compliance efforts.
  • Internal audit is responsible for handling compliance in 35 percent of the public companies.
  • Emerging growth companies had the highest average annual compliance costs at $1.43 million, followed by large accelerated filers ($1.34 million), non-accelerated filers ($1.22 million) and accelerated filers ($914,000).
  • Fewer than half (43 percent) of organizations receive SOC I reports from external providers. That’s expected to increase in the next fiscal year because of growing pressure to get the reports to external auditors if requested.
  • Average annual internal costs for SOX compliance was $1.11 million for public companies, $1.44 million for private companies planning an IPO and $1.38 million for private companies

Does the cost of SOX compliance continue to impact your firm or your clients? We would love to hear from you.

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