SOX costs sock small firms.

• Author: Swartz, Nikki
• Position: UP FRONT: News, Trends & Analysis - Sarbanes-Oxley Act - Report

Smaller companies may have received multiple extensions for full compliance with the Sarbanes-Oxley Act of 2002 (SOX), but they aren't getting any favors when it comes to its costs.

"The Cost of Being Public in the Era of Sarbanes-Oxley," a study from Foley & Lardner LLP, found that since 2001, the average cost of SOX compliance for companies with under $1 billion in annual revenue has increased more than $1.7 million to about $2.8 million.

Foley's fifth annual study on SOX costs revealed that while internal costs have gone down, other out-of-pocket expenses, such as audit fees, board compensation, and legal fees, rose over the past year, and, on average, external audit fees have increased 271 percent between fiscal years 2001 and 2006 for companies with under $1 billion in revenue.

The study actually found that SOX compliance costs decreased during fiscal year 2006. But despite the decrease, compliance costs have been rising since 2003, with Section 404 compliance costs responsible for most of the uptick. According to Foley, total fees paid to auditors jumped 59 percent between FY 2003 and FY 2006.

While overall SOX compliance costs have "plateaued" Foley said the out-of-pocket costs facing public companies increased between FY 2005 and FY 2006, driven by increased...