The cost of Sarbanes-Oxley compliance for US-domiciled European companies is an issue CFOs need to address; and address soon. 2005 is fast approaching, and delays will prove expensive.
New research from HandySoft has revealed that European companies listed on US stock exchanges are facing a 35% increase in audit fees as a result of mandatory compliance with the Sarbanes Oxley Act (SOX). This equates to an additional annual burden of some €370 million per year, or €1.35 million per company per year. The report also questions how effectively and cost-efficiently these companies will harness technology to help implement SOX without costs escalating.
US domiciled companies have come under much scrutiny regarding SOX readiness and compliance; yet little research has been conducted to date on the impact that SOX will have on affected European corporations. The HandySoft report aims to redress this balance.
Key findings from the report are:
As a result of SOX, the average external audit cost for a US-listed European company, 2005 onwards, will be €5.19 million, an increase of some €1.35 million over current average audit costs
Across the whole community of these companies, this represents an extra annual burden of around €370 million
By the (European) deadline of 2005, only around three quarters of these companies are expected to implement systems and procedures that effectively establish internal financial controls and that are able to swiftly identify and resolve financial anomalies ? two key areas of SOX compliance
Approaching half of these companies are not expected to implement automation by 2005 that will significantly reduce compliance costs
Over a third of US-listed European companies will not have implemented automation by 2005 that will substantially help build investor confidence through transparent reporting
Wendy Cohen, director of sales EMEA, HandySoft, comments: "Companies that choose not to meet the SOX schedule are likely to find the analysts and the credit rating experts marking their stocks down.