SOX 404 Compliance Helps Public Firms Cut Costs
Business Week
Nov 17 2005 : In 2004, Sarbanes-Oxley Section 404 compliance cost major public firms an average of USD 4.4 million apiece, according to research by Financial Executives International (FEI). Once the pain barrier is broken however, costs can be cut and productivity boosted, as SOX 404 can catalyze system upgrades and efficiency projects that previously stalled. Mailing and document technology company Pitney Bowes for instance will save over USD 500,000 in 2005 by merging four accounts receivable offices into one, after a SOX 4040 review identified areas of inefficiency.
Although the costs of SOX 404 compliance in 2004 were believed to far exceed any gains by 94 per cent of top executives at the 217 public companies profiled by FEI, the reality differs in 2005. PricewaterhouseCoopers also predicts public companies to spend 25 per cent to 35 per cent less on checking internal controls this year, even if auditors’ fees do not show a parallel decline. Of 131 CFOs and managing directors interviewed for PwC’s recent Management Barometer, most agreed their SOX 404 compliance had improved corporate performance and process controls.
Specifically, 76 per cent of respondents to the PwC Barometer believed SOX 404 had catalyzed the improvement of internal controls, with another 70 per cent believing key processes and controls had improved as a result. Sixty-five per cent believed SOX 404 compliance provided motivation to improve corporate risk management, with a further 61 per cent indicating that their compliance had streamlined underlying corporate processes. Fifty-seven per cent had aligned quarterly Section 302 reporting with their annual 404 assertion, with another 14 per cent planning to do so.