The cost of Sarbanes-Oxley.

• Author: Swartz, Nikki
• Position: Up front: news, trends & analysis

A recent AMR Research report found that 77 percent of U.S. companies will spend more on information technology (IT), business process change, corporate governance, and/or consulting this year in efforts to comply with the Sarbanes-Oxley Act. According to the report:

* 52 percent of public companies are in the process of implementing their Sarbanes-Oxley compliance plans

* 33 percent are still evaluating the issues at hand

* Only 15 percent reported that they have not yet begun to evaluate options, but most plan to start soon

* 61 percent expect business process change will be required

* More than 61 percent are looking for external assistance from audit firms and/or consultants

The report found that many companies are forming cross-functional Sarbanes-Oxley project teams and seeking help from external audit/risk management consultants to define, analyze, and improve best practices for managing their internal controls.

But compliance costs companies. According to a study by Foley & Lardner and KRC Research, Sarbanes-Oxley implementation is expensive. The study of 450 companies found that audit fees for organizations with a market capitalization of around $1 billion rose by 35 percent in 2002. The report blamed the rising costs on the new corporate governance laws and greater demands from the market to ensure sound financial statements. Boston-based AMR Research estimates that the act's requirements present a gargantuan "Y2K-like" task that will cost organizations as much as $2.5 billion.

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