Survey Says Sarbox Savings Leveling Off

Lora Bentley

New research from Compliance Week suggests the Public Company Accounting Oversight Board's Accounting Standard 5 isn't doing what regulators hoped it would.


BusinessWire reports:

In total, the results suggest that more than 80 percent of companies expect no better than a 20 percent reduction in key controls going forward.


"Companies appear to be saying that they've already made most of their improvements related to SOX and financial reporting," says Matt Kelly, editor-in-chief of Compliance Week. "Any additional improvements will be marginal, and certainly not as dramatic as regulators and standard setters claimed when releasing AS5."

In AS5, the PCAOB says companies should take a "top-down" approach to compliance and use a risk-based analysis to determine which internal controls are most important and then focus on those. Regulators hoped that the new guidelines would allow companies to reduce the number of their controls, which would reduce the complexity of the corresponding reports and, in turn, reduce the cost of compliance with Sarbanes-Oxley section 404.


For its "key controls" study, Compliance Week surveyed approximately 300 public companies during a one-week period in January via an online reader survey. The study revealed that though most respondents had reduced their key controls "significantly" during the first year of Sarbox compliance, less than half expect to reduce their controls by more than 10 percent in coming years.


Not surprisingly, the study also found that large companies had more controls than SMBs, and that companies in highly regulated industries like pharma and financial services had more complex controls in place.

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Add Comment      Leave a comment on this blog post
Mar 8, 2008 2:06 PM M. Mooradian M. Mooradian  says:
What must be emphasized is that the benefits of AS5 will be more prevalent with non-accelerated filers rather than with accelerated filers who've had to learn the hard way after five years of SOX compliance and therefore made adjustments along the way. And even for non-accelerated filers who are filing for the first time for year ends of 12/15/07 or later, external audit attestation does not even begin until 2009!! So trying to measure the real benefits of AS5 is premature at this point. Reply
Mar 13, 2008 9:15 AM David David  says:
I have non-accelerated clients who are in compliance with no material weaknesses and under 60 key controls...and equivalent client I worked with 2 years ago had almost 300 controls (they would have been non-accelerated based on market cap but went public).Now some of those controls are due to business complexity but most non-accelerated filers should be siginficantly under 100 key controls if they do a proper risk assessment and tie it to their ICFR.The other thing I would question in the artical, many large clients I have worked with put all of their controls compliance cost in the SOX bucket because it is easier to justify for budgeting than regular internal audit. I have found in a recent review of a fortune 500 company that as many as 25% of their controls were unnecessary for SOX compliance but were deemed important by management for overall internal controls. SOX is a good boogeyman for getting internal audit dollars budgeted. Reply

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