: 404 Survey

FEI Survey: Management Drives Sarbanes-Oxley Compliance Costs Down,
 But Auditor Fees Virtually Unchanged
published May 16, 2007

FEI announced the results of its sixth Sarbanes-Oxley compliance survey, which found that Section 404 compliance cost Corporate America less in year three of adoption than in each of the first two years.  FEI polled 200 companies to gauge experiences in complying with Section 404. Responding companies have average revenues of $6.8 billion.   

According to the FEI survey, which included 172 “accelerated filers”— companies with market capitalizations above $75 million — total average cost for Section 404 compliance was $2.9 million during fiscal year 2006, which represents a 23 percent decrease from 2005 totals.  The data also shows reductions in internal and external costs of compliance, with internal staff time decreasing by 10 percent.  The lower costs can be attributed to companies’ increased efficiencies in complying with Section 404.
 
“Efficiency gains are being realized in Section 404 compliance; however audit fees are virtually unchanged. Companies have driven down compliance expenses by getting beyond the initial start up, and now await relief from the added audit costs of Section 404,” said FEI President and CEO Michael Cangemi. “While there is still work to be done, we have come a long way and total compliance costs have dropped about one-third (35 percent) since year one.  This drop is largely attributed to increased efficiencies, a positive learning curve, and technical systems and software rollouts. We are hopeful that pending guidance from the SEC and PCAOB will further reduce 404 expenses.”

Press Release
 
Survey Detail Report Package
(free to members, $99 to purchase for all others)
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Package includes:

• Executive Summary
• Exhibit A – 2006 Costs by Filing Status
• Exhibit B – 2006 Costs by Sales Revenue
• Exhibit C – Trends in Total Costs by Filing Status
• Exhibit D – 2006 Internal Hours by Filing Status
• Exhibit E – 2006 IT Control Hours by Filing Status
• Exhibit F – 2006 Audit Costs by Filing Status
• Exhibit G – 2006 Costs of Compliance: Centralized vs. Decentralized
• Exhibit H – Potential Benefits of Section 404
• Exhibit I  -- Costs vs. Benefits
• Exhibit J – Operational Issues and Management of the Process
  

FEI Member Write-in Comments re: Sarbanes-Oxley Section 404 Implementation fei members only